Republic of the Philippines

SUPREME COURTManilaEN BANCG.R. No. L-10431July 31, 1962COLLECTOR OF INTERNAL REVENUE, petitioner,vs.LA TONDEA INC., and THE COURT OF TAX APPEALS,respondents.Office of the Solicitor General for petitioner.Manuel V. San Jose forrespondents.PAREDES, J.:The respondent "La Tondea, Inc." a duly licensed rectifier, has beenengaged in the business of manufacturing wines, and liquors, with adistillery at 1068 Velasquez, Tondo, Manila. The principal products ofthe respondent are "Ginebra San Miguel", "Manila Rum", "Oak BarrelRum", "Mallorca Wine", "Anizado", "Creme de Mente", "Creme deCacao", etc. Since 1929, respondent has been purchasing the alcoholused in the manufacture of its products, principally from BinalbaganIsabela Sugar Central, Negros Occidental and Central Azcarera DonPedro in Nasugbu, Batangas, and has been removing this alcohol fromthe centrals to respondent's distillery under joint bonds, withoutprepayment of specific taxes, with the express permission and approvalof the petitioner Collector of Internal Revenue. The quantity of alcoholpurchased and received by the respondent from the centrals arerecorded and entered in the BIR Official Register Books of "La Tondea,Inc. A-Account", under the column "CRUDE spirit" (Exhs. A, A-1, G, G1), attested by the Inspector of the Bureau assigned to respondent'sdistillery. In the manufacture of "Manila Rum", respondent uses asbasic materials low test alcohol, purchased in crude form from thesuppliers, which it re-rectifies or subjects to further distillation, inorder to suit the purpose of respondent in producing only high qualityproducts. In the process of further rectification or distillation, lossesthru evaporation had necessarily been incurred, for which thepetitioner in the past had given the respondent allowance of notexceeding 7% for said losses. Respondent stated that the processadopted by it in the manufacture of its "Manila Rum", has now madethis product the largest selling rum in the Philippines and the specifictaxes that it had been paying the government, had steadily increasedfrom P3, 172,515.30 in 1950 to P4, 973,123.40 in 1954. On May 8,1954, petitioner wrote a demand letter to respondent for the paymentof specific taxes, in the total amount of P154, 663.10 on alcohol lost byevaporation, thru re-rectification or re-redistillation, covering theperiod from June 7, 1950 to February 7, 1954. A first extension of 30

days within which to reply was granted the respondent by the

petitioner. On July 26, 1954, it asked for another 30-day extension toreply (Exh. I-3). On August 2, 1954, petitioner granted 5 days only, fromAugust 2, 1954 (Exh. I-f), or until August 7, 1954. On August 6, 1954,respondent answered the demand letter dated May 8, 1954 (Exh. I),protesting against the said assessment (Exhs. 1-5 and 1-b). In a letterdated August 26, 1954, the petitioner made manifest its refusal toreconsider the assessment and urged the respondent to pay within 3days from receipt, the amount of the assessment, which communicationwas received by the respondent on August 31, 1954 (Exh. I-7). OnSeptember 1, 1954, the respondent appealed the decision to theConference Staff in the same Bureau (Exh. I-8). On September 3, 1954,the Conference Staff gave the appeal due course (Exh. I-9).Before any hearing could be had in the Conference Staff, on January 8,1955, the respondent received a letter from the petitioner datedDecember 22, 1954, requiring it to comply with Department of FinanceOrder No. 213, to deposit one-half of the amount of assessment in cashand the balance guaranteed by a surety bond (Exh. 1-11). Respondentrequested for reconsideration of this requirement (Exh. I-1a) onJanuary 10, 1955, which was denied on February 10, 1955 (Exh. I-13). Asecond motion for reconsideration presented on February 15, 1955(Exh. I-14), followed by a supplementary letter (Exh. I-15) datedFebruary 17, 1955 was denied, same having been received byrespondent on March 16, 1955, and gave the respondent 5 days fromreceipt thereof, within which to comply with the said Order. Notsatisfied with the said rulings, the La Tondea, Inc. presented an actionwith the respondent Court of Tax Appeals on March 18, 1955. The TaxCourt on December 7, 1955, rendered the following judgment IN VIEW OF THE FOREGOING CONSIDERATION, the decision ofrespondent Collector of Internal Revenue, dated May 8, 1954, is herebymodified, and petitioner La Tondea, Inc., is hereby ordered to pay therespondent Collector of Internal Revenue the sum of P672.15, by wayof specific tax. However, with respect to the balance of the assessmentamounting to P153, 990.95, which corresponds to the period afterJanuary 1, 1951 and up to February 27, 1954, pursuant to Republic ActNo. 592, the petitioner is declared exempt from liability for the specifictaxes assessed therefor. Without pronouncement as to costs.On appeal to this Court, the petitioner alleges that the Court of TaxAppeals erred (1) In exempting the respondent La Tondea, Inc. fromthe payment of the specific tax on rectified alcohol lost in process offurther rectification, during the period from January 1, 1951 toFebruary 27, 1954; and (2) In assuming jurisdiction over the case.

It appears that the specific taxes in question were assessed by the

petitioner "in accordance with section 133 the Tax Code". Up toDecember 31, 1950, said section reads:SEC 133. Specific tax on distilled spirits. On distilled spirits thereshall be collected, except as hereinafter provided, specific taxes asfollows:(a) If produced from sap of the nipa, coconut, casava, camote, or buripalm, or from the juice syrup, or sugar of the cane, per proof liter,forty-five centavo.(b) If produced from any other material, per proof liter, one peso andseventy centavos.This tax shall be proportionately increased for any strength of thespirits taxed over proof spirits."Distilled spirits", as here used, includes all substances known as ethylalcohol, dehydrated oxide of ethyl, or spirits of wine, which arecommonly produced by the fermentation and subsequent distillation ofgrain starch, molasses, or sugar, or of some syrup of sap, including alldilutions or mixtures; and the tax shall attach to this substance as soonas it is in existence as such, whether it be subsequently separated aspure or impure spirits, or be immediately or at any subsequent timetransformed into any other substance either in process of originalproduction or by any subsequent process.Pursuant to the above provision of law, therefore, "the tax shall attachto this substance as soon is it is in existence as such" etc. However, onJanuary 1, 1951, Republic Act No. 592 took effect, amending section133 and the clause underlined above had been eliminated. The evidentintention of the law maker in deleting the all embracing underlinedclauses, was to subject to specific tax not all kinds of alcoholicsubstances, but only distilled spirits as finished products, actuallyremoved from the factory or bonded warehouse. The said amendmentcould not mean anything else; it is in harmony with section 129, of thesame Tax Code, which provides SEC 129. Removal of spirits or cigar under bond. Spirits requiringrectification may be removed from the place of their manufacture tosome other establishment for the purpose of rectification without theprepayment of the specific tax, provided the distiller removing suchspirits and the rectifier receiving them shall file with the Collector ofInternal Revenue their joint bond conditioned upon the future paymentby the rectifier of the specific tax that may be due on any finishedproduct. . . . .And if one would consider that the Tax Code does no prohibit furtherrectification or distillation and defines in section 194 thereof, a rectifieras a person who rectifies, purifies or refines distilled spirits, theconclusion is logical that when alcohol, even if already distilled (as in

the present case) or rectified, is again rectified, purified or refined, the

specific tax should be based on the finished product, and not on theevaporated alcohol. The intention not to subject to specific tax all kindsof alcoholic substances but only distilled spirits as finished products, isreflected in former Senator Garcia's observation on the floor of theSenate, during the discussion of House Bill No. 1443 (now Rep. Act No.592), when he proposed the elimination of the phrase "and the tax shallattach to this substances as soon as it is in existence as such, etc." Hesaid That is why, Mr. President, in Section 1 of this Bill now underconsideration. I have some serious objections to the provision where allkinds of alcoholic substance which falls under the definition of proofspirits in the last paragraph of the same Section I of the proposedmeasure are taxable because this is one of those that I consider ofdeterrent effect to the industrialization of this country . . . (SenateDiario No. 6, Jan. 15, 1951, Original 4th Special Session; Emphasissupplied.)And on August 23, 1956, upon the recommendation of the Bureau ofInternal Revenue itself, Rep. Act No. 1608 was passed, amendingsection 133 of the Tax Code, as amended by R. A. No. 592, restoring thevery same clause which was eliminated (Sec. 7, R.A. No. 1608). Theinference, therefore, is clear that from January 1, 1951, when Rep. ActNo. 592, took effect, until August 23, 1956, when R.A. No. 1608 becamea law, the tax on alcohol did not attach as soon as it was in existence assuch, but on the finished product. And this must be so, otherwise agreat injustice would be caused upon a duly licensed rectifier, who, likethe respondent herein, will be made to pay the specific tax on thealcohol lost thru evaporation, from which no one has been benefited,based on the provision of laws then extant, of doubtful application. Inevery case of doubt, tax statutes are construed most strongly againstthe government and in favor of the citizens, because burdens are not tobe imposed beyond what the statutes expressly and clearly import(MRR Co. v. Coll. of Customs, 52 Phil. 950 Luzon Stev. Co. v. Trinidad,43 Phil. 803, 809). It should be pointed out also that said section 129was amended adding the following And provided, further, That in cases where alcohol has already beenrectified either by original and continuous distillation or byredistillation is further rectified, no loss for rectification and handlingshall be allowed and the rectifier thereof shall pay the specific tax dueon such losses (Sec. 5, Rep. Act No. 1608).which obviously reveals that the purpose of the amendment is to tax,only now, alcohol lost, in further distillation or rectification. This lawcertainly should not be given retroactive effect, so as to cover theperiod in question (January 1, 1951 to February 27, 1954). It is only

after August 23, 1956 that the government woke up from its lethargyand hastened to fill the hiatus.The second assignment of error is predicated upon the proposition, thatthe respondent Court of Tax Appeals had no jurisdiction over the case,because the petition for review was not filed within the 30-day periodas provided by section 11 of Rep. Act No. 1125 (Law creating the CTA),which states SEC. 11. Who may appeal; effect of appeal. Any person, associationor corporation adversely affected by a decision or ruling of theCollector of Internal Revenue, the Collector of Customs . . . or anyprovincial or city Board of Assessment Appeals, may file an appeal inthe Court of Tax Appeals within thirty days after the receipt of suchdecision or ruling . . .Conceding for the purpose of argument that the ruling appealable wasthe letter-assessment dated May 1, 1954, still we believe that thepetition for review to the Tax Court was filed within the time. The intraoffice arrangement in the Bureau of Internal Revenue allowed ataxpayer to appeal from the ruling of the Collector to a ConferenceStaff of the same Bureau. The appeal made on September 1, 1954, tothe Conference Staff, from said letter-assessment dated May 8, 1954(received by the respondent on May 28, 1954), which was reiterated inpetitioner's letter of August 26, 1954, (received by the respondent onAugust 31, 1954), had suspended the period because it was a remedyprescribed by the petitioner himself, made available to the respondent(Collector of Int. Rev. v. Suck Consolidated Mining Co., L-11527, Nov.25, 1958). When the Conference Staff gave due course to the appeal onSeptember 3, 1954, the petitioner gave the impression that his letterassessments of May 8 and August 26, 1954, were still subject to reviewby his Conference Staff. And when the Conference Staff finally refusedto reconsider its ruling requiring respondent to deposit of theamount of the tax in cash, and payment of the balance or guaranteed bya surety bond, after the submission of two requests for reconsideration,the second denial having been received by respondent only on March16, 1955 (Exh. I-16), said it was then only, that the petitioner may orcan be said to have rejected the administrative appeal and gave finalityto his letter of August 26, 1954. We believe that petitioner did notcreate the Conference Staff and permitted a taxpayer to appeal to itfrom his ruling, as a mere administrative expediency, to delay thetaxpayer from appealing to the Tax Court, and thus allow the period ofhis appeal to lapse. We should presume that this injurious result wasnot intended by the Government. This being the case, as it is the case,when respondent lodged its petition for review with the Tax Court onMarch 18, 1955, only three (3) days in all, had elapsed, out of theperiod. The period within which the review must be sought, should be

counted from the denial of the motion for reconsideration because of

the principle that all administrative remedies must be exhausted beforerecourse to the courts can be had against orders or decisions ofadministrative bodies (Sec. of Agriculture, etc., et al. v. Hoar, et al.,G.R. No. L-7752, May 27, 1955). If, as it should be, the final appealableruling of the petitioner, was that received by respondent on March 16,1955, then only two (2) days had been consumed by the respondent ofthe statutory period. In either case, the appeal to the Tax Court waspresented on time and the latter has jurisdiction to take cognizance ofthe case.WHEREFORE, the decision appealed from is hereby affirmed, withoutpronouncement as to costs.

Republic of the Philippines

SUPREME COURTManilaSECOND DIVISIONG.R. No. L-34526 August 9, 1988HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWINRIVERS PLANTATION, INC. and MARSMAN & CO., INC., forthemselves and in behalf of other persons and entities similarlysituated, petitioners,vs.CENTRAL BANK OF THE PHILIPPINES, respondent.PARAS, J.:This is a petition for certiorari and prohibition which seeks: (1) todeclare Monetary Board Resolution No. 1995, series of 1971, as nulland void; (2) to prohibit the Central Bank from collecting thestabilization tax on banana exports shipped during the period January1, 1972 to June 30, 1982; and (3) a refund of the amount collected asstabilization tax from the Central Bank.The facts of this case as culled from the records are as follows:Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation,Inc. and Marsman Plantation (Manifestation, Rollo, P. 18), collectivelyreferred to herein as petitioners, are domestic corporations duly

organized and existing under the laws of the Philippines, all of whichare engaged in the production and exportation of bananas in and fromMindanao.Owing to the difficulty of determining the exchange rate of the peso tothe dollar because of the floating rate and the promulgation of CentralBank Circular No. 289 which imposes an 80% retention scheme on alldollar earners, Congress passed Republic Act No. 6125 entitled "an actimposing STABILIZATION TAX ON CONSIGNMENTS ABROAD TOACCELERATETHEECONOMICDEVELOPMENTOFTHEPHILIPPINES AND FOR OTHER PURPOSES," approved and madeeffective on May 1, 1970 (Comment on Petition, Rollo, p, 32), toeliminate the necessity for said circular and to stabilize the peso.Among others, it provides as follows:SECTION 1. There shall be imposed, assessed and collected astabilization tax on the gross F.O.B. peso proceeds, based on the rate ofexchange prevailing at the time of receipt of such proceeds, whetherpartial or total, of any exportation of the following products inaccordance with the following schedule:a. In the case of logs, copra, centrifugal sugar, and copper ore andconcentrates:Ten per centum of the F.O.B. peso proceeds of exports received on orafter the date of effectivity of this Act to June thirty, nineteen hundredseventy one;Eight per centum of the F.O.B. peso proceeds of exports received fromJuly first, nineteen hundred seventy-one to June thirty, nineteenhundred seventy-two;Six per centum of the F.O.B. peso proceeds of exports received fromJuly first, nineteen hundred seventy two to June thirty, nineteenhundred seventy- three; andFour per centum of the F.O.B. peso proceeds of exports received fromJuly first, nineteen hundred seventy-three to June thirty, nineteenhundred seventy-four.b. In the case of molasses, coconut oil, dessicated coconut, iron ore andconcentrates, chromite ore and concentrates, copra meal or cake,unmanufactured abaca, unmanufactured tobacco, veneer core andsheets, plywood (including plywood panels faced with plastics), lumber,canned pineapples, and bunker fuel oil;Eight per centum of the F.O.B. peso proceeds of exports shipped on orafter the date of effectivity of this Act to June thirty, nineteen hundredseventy-one;Six per centum of the F.O.B. peso proceeds of exports shipped from Julyfirst, nineteen hundred seventy one to June thirty nineteen hundredseventy- two;

Four per centum of the F.O.B. peso proceeds of exports shipped fromJuly first, nineteen hundred seventy-two to June thirty nineteenhundred seventy-three; andTwo per centum of the F.O.B. peso proceeds of exports shipped fromJuly first, nineteen hundred seventy three to June thirty nineteenhundred seventy-four.Any export product the aggregate annual F.O.B. value of which shallexceed five million United States dollars in any one calendar yearduring the effectivity of this Act shall likewise be subject to the rates oftax in force during the fiscal years following its reaching the saidaggregate value. (Emphasis supplied).During the first nine (9) months of calendar year 1971, the total bananaexport amounted to an annual aggregate F.O.B. value of P8,949,000.00(Answer, Rollo, p. 73) thus exceeding the aggregate F.O.B. value of fivemillion United States Dollar, bringing it within the ambit of RepublicAct No. 6125. Consequently, the banana industry was in a dilemma asto when the stabilization tax was to become due and collectible from itand under what schedule of Section 1 (b) of Republic Act 6125 shouldsaid tax be collected. Accordingly, petitioners through their counsel, byletter dated November 5, 1971, sought the authoritativepronouncement of the Central Bank (herein referred to as respondent),therein advancing the opinion that the stabilization tax does notbecome due and collectible from the petitioners until July 1, 1972 at therate of 4% of the F.O.B. peso proceeds of the exports shipped from July1, 1972 to June 30,1973. Replying by letter dated December 17,1971(Rollo, p. 11), the Central Bank called attention to Monetary BoardResolution No. 1995 dated December 3, 1971 which clarified that:1) For exports of bananas shipped during the period from January 1,1972 to June 30, 1972; the stabilization tax shall be at the rate of 6%;2) For exports of bananas shipped during the period from July 1, 1972to June 30, 1973, the stabilization tax shall be at the rate of 4%; and3) For exports of bananas shipped during the period from July 1, 1973,to June 30, 1974, the stabilization tax shall be at the rate of 2%."Contending that said Board Resolution No. 1995 was manifestlycontrary to the legislative intent, petitioners sought a reconsiderationof said Board Resolution by letter dated December 27, 1971 (Rollo, p.12) which request for reconsideration was denied by the respondent,also by letter dated January 20, 1972 (Rollo, p. 24). With the denial ofpetitioners' request for reconsideration, respondent thru its agentBank, Rizal Commercial Banking Corporation has been collecting fromthe petitioners who have been forced to pay under protest, suchstabilization tax.

Petitioners view respondent's act as a clear violation of the provision of

Republic Act No. 6125, and as an act in excess of its jurisdiction, hence,this petition.The sole issue in this case is whether or not respondent acted withgrave abuse of discretion amounting to lack of jurisdiction when itissued Monetary Board Resolution No. 1995, series of 1971 which ineffect reaffirmed Central Bank Circular No. 309, enacted pursuant toMonetary Board Resolution No. 1179.There is here no dispute that the banana industry is liable to pay thestabilization tax prescribed under Republic Act No. 1995, it being theadmission of both parties, that the Industry has indeed reached and forthe first time in the calendar year 1971, a total banana exportexceeding the aggregate annual F.O.B. value of five million UnitedStates dollars. The crux of the controversy, however, is the manner ofimplementation of Republic Act No. 6125.Section 1 of R.A. 6125 clearly provides as follows:An export product the aggregate annual F.O.B. value of which shallexceed five million US dollars in any one calendar year during theeffectivity of the act shall likewise be subject to the rates of tax in forceduring the fiscal year following its reaching the said aggregate value."Petitioners contend that the stabilization tax to be collected from thebanana industry does not become due and collectible until July 1, 1972at the rate of 4% of the F.O.B. peso proceeds of the export shipped fromJuly 1, 1972 to June 30,1973. They further contend that respondentgave retroactive effect to the law (RA 6125) by ruling in MonetaryBoard Resolution No. 1995 dated December 3, 1 971, that the exportstabilization tax on banana industry would start to accrue on January 1,1972 at the rate of 6% of the F.O.B. peso proceeds of export shippedfrom July 1, 1971 to June 30, 1972 (Rollo, pp. 3-4).Respondent, on the other hand, contends that the aforecited provisionof RA 6125 merely prescribes the rates that may be imposed but doesnot provide when the tax shall be collected and makes no reference toany definite fixed period when the tax shall begin to be collected (Rollo,pp. 77-78). There is merit in this petition.In the very nature of things, in many cases it becomes impracticable forthe legislative department of the Government to provide generalregulations for the various and varying details for the management of aparticular department of the Government. It therefore becomesconvenient for the legislative department of the government, by law, ina most general way, to provide for the conduct, control, andmanagement of the work of the particular department of thegovernment; to authorize certain persons, in charge of the managementand control of such department (United States v. Tupasi Molina, 29Phil. 119 [19141).

Such is the case in RA 6125, which provided in its Section 6, as follows:

All rules and regulations for the purpose of carrying out the provisionsof the act shall be promulgated by the Central Bank of the Philippinesand shall take effect fifteen days after publication in three newspapersof general circulation throughout the Philippines, one of which shall bein the national language.Such regulations have uniformly been held to have the force of law,whenever they are found to be in consonance and in harmony with thegeneral purposes and objects of the law. Such regulations onceestablished and found to be in conformity with the general purposes ofthe law, are just as binding upon all the parties, as if the regulation hadbeen written in the original law itself (29 Phil. 119, Ibid). Upon theother hand, should the regulation conflict with the law, the validity ofthe regulation cannot be sustained (Director of Forestry vs. Muroz 23SCRA 1183).Pursuant to the aforecited provision, the Monetary Board issuedResolution No. 1179 which contained the rules and regulations for theimplementation of said provision which Board resolution wassubsequently embodied in Central Bank Circular No. 309, dated August10, 1970 (duly published in the Official Gazette, Vol. 66, No. 34, August24, 1940, p. 7855 and in three newspapers of general circulationthroughout the Philippines namely, the Manila Times, Manila Chronicleand Manila Daily Bulletin). Section 3 of Central Bank Circular No. 309,"provides that the stabilization tax shall begin to apply on January firstfollowing the calendar year during which such export products shallhave reached the aggregate annual F.O.B. value of more than $5 millionand the applicable tax rates shall be the rates prescribed in schedule(b) of Section 1 of RA No. 6125 for the fiscal year following thereaching of the said aggregate value." Central Bank Circular No. 309was subsequently reaffirmed in Monetary Board Resolution No. 1995herein assailed by petitioners for being null and void (Rollo, pp. 97- 98).In its comment (Rollo, p. 40), respondent argues that the request forauthoritative pronouncement of petitioners was made because therewas no express provision in Section 1 of RA 6125 which categoricallystates, when the stabilization tax shall begin to accrue on thoseaggregate annual F.O.B. values exceeding five (5) million United Statesdollars in any one calendar year during the effectivity of said act. Forwhich reason, the law itself authorized it under Section 7 to promulgaterules and regulations to carry out the provisions of said law.In petitioner's reply (Rollo, p. 154) they argue that since the BananaExports reached the aggregate annual F.O.B. value of US $5 million inAugust 1971, the stabilization tax on banana should be imposed only onJuly 1, 1972, the fiscal year following the calendar year during whichthe industry attained the $5 million mark. Their argument finds support

in the very language of the law and upon congressional record where aclarification on the applicability of the law was categorically made bythe then Senator Aytona who stated that the tax shall be applicable onlyafter the $5 million aggregate value is reached, making such taxprospective in application and for a period of one year- referring to thefiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearlysuch clarification was indicative of the legislative intent. Further, theyargue that respondent bank through the Monetary Board clearlyoverstepped RA 6125 which empowered it to promulgate rules andregulations for the purpose of carrying out the provisions of said act,because while Section 1 of the law authorizes it to levy a stabilizationtax on petitioners only in the fiscal year following their reaching theaggregate annual F.O.B. value of US $5 million, that is, the fiscal yearJuly 1, 1972 to June 30, 1973, at a tax rate of 4% of the F.O.B. pesoproceeds, respondent in gross violation of the law, instead issuedResolution No. 1995 which impose a 6% stabilization tax for thecalendar year January 1, 1972 to June 30, 1972, which obviously is inexcess of its jurisdiction. It was further argued that in directing itsagent bank to collect the stabilization tax in accordance with MonetaryBoard Resolution No. 1995, it acted whimsically and capriciously.(Rollo, p. 155).It will be observed that while Monetary Board Resolution No. 1995cannot be said to be the product of grave abuse of discretion but ratherthe result of respondent's overzealous desire to carry into effect theprovisions of RA 6125, it is evident that the Board acted beyond itsauthority under the law and the Constitution. Hence, the petition forcertiorari and prohibition in the case at bar, is proper.Moreover, there is no dispute that in case of discrepancy between thebasic law and a rule or regulation issued to implement said law, thebasic law prevails because said rule or regulation cannot go beyond theterms and provisions of the basic law (People vs. Lim, 108 Phil. 1091).Rules that subvert the statute cannot be sanctioned (University of Sto.Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. VeteransAdministration, 51 SCRA 340). Except for constitutional officials whocan trace their competence to act to the fundamental law itself, a publicofficial must locate to the statute relied upon a grant of power beforehe can exercise it. Department zeal may not be permitted to outrun theauthority conferred by statute (Radio Communications of thePhilippines, Inc. v. Santiago L-29236, August 21, 1974, 58 SCRA 493;cited in Tayug Rural Bank v. Central Bank, L-46158, November28,1986,146 SCRA 120,130).PREMISES CONSIDERED, this petition is hereby GRANTED.SO ORDERED.

Republic of the Philippines

SUPREME COURTManilaSECOND DIVISIONG.R. No. L-69136 September 30, 1988COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.MEGA GENERAL MERCHANDISING CORPORATION and THECOURT OF TAX APPEALS, respondents.The Solicitor General for petitioner.Fortunato S. Rivera for respondents.PARAS, J.:This is a petition for review of the decision of the Court of Tax Appeals,promulgated on May 21, 1984, in CTA Case No. 3078 entitled "MegaGeneral Merchandising Corporation vs. Commissioner of InternalRevenue," holding that respondent corporation is not liable for specifictax in the sum of P275,652.00 on its importations of crude paraffin waxon June 21 and August 17, 1977 under Section 142(i) of the Tax Code,as amended by P.D. No. 392, but to 7% advance sales tax, (now Section197 II) in relation to Section 186 (now Section 200 of the Tax Code) andfurther ordering the Commissioner of Internal Revenue to refund orcredit to petitioner the said assessment (Rollo, Annex "C", pp. 38-47).The antecedent facts of this case are as follows:Prior to the promulgation of P.D. No. 392 on February 18, 1974, allimportations of paraffin wax, irrespective of kind and nature, weresubject to 7% advance sales tax on landed costs plus 25% mark uppursuant to Section 183(b) now Section 197(II) in relation to Section186 (now Section 200) of the Tax Code.With the promulgation of P.D. No. 392, a new provision for theimposition of specific tax was added to Section 142 of the Tax Code,that is, sub- section (i) which reads:Section 142. Specific tax on manufactured oils and other fuels.Onrefined and manufactured mineral oils and other motor fuels, thereshall be collected the following taxes:(i) Greases, waxes and petroleum, per kilogram, thirty-five centavos; ...Therefore, beginning February 18,1974, the date of effectivity of P.D.No. 392, all importations of paraffin wax were subject to the specifictax imposed under Section 142(i) of the Tax Code, instead of the former7% sales tax.Hence, respondent corporation paid the corresponding specific taxthereon in the total amount of P177,750.00 which applies to its totalimportation of crude paraffin on April 18, 1975, or exactly 1 year and 2months after the effectivity of P.D. No. 392.

On April 22, 1975, the respondent corporation wrote the Commissioner

of Internal Revenue for clarification as to whether imported crudeparaffin wax is subject to specific tax under Section 142 (i) of the TaxCode, as amended by P.D. No. 392, or to the 7% advance sales tax.Former Commissioner Misael P. Vera in his reply to said query datedMay 14, 1975 ruled that only wax used as high pressure lubricant andmicro crystallin is subject to specific tax; that paraffin which was usedas raw material in the manufacture of candles, wax paper, matches,crayons, drugs, appointments etc., is subject to the 7% advance salestax, the tax to be based on the landed cost thereof, plus 25% mark-up.Due to Commissioner Vera's ruling of May 14, 1975, several importersincluding respondent corporation filed several claims for tax refund ortax credit of specific tax paid by them on importation of crude paraffinwax.Considering that respondent corporation had paid the amount ofP477,750.00 as specific tax pursuant to Section 142(i) of the Tax Codeon its importation of crude paraffin wax on April 18, 1975 (an amountbigger than the 7% advance sales tax prescribed under Section 183(b)(now Section 197 II) in relation to Section 186 (now Sec. 200 of the TaxCode) respondent corporation in a letter, dated November 27, 1975,requested for a refund or tax credit of the amount of P321,436.79representing the difference between the amount paid as specific taxand the 7% advance sales tax.Since the law (Section 142(i) of the Tax Code, amended by P.D. No. 392)does not make any distinction as to the kind of wax subject to specifictax, then Acting Commissioner of Internal Revenue Efren I. Plana, onJanuary 28, 1977 denied respondent Corporation's claim for refund ortax credit of the amount of P321,436,79. On this ruling, respondentcorporation filed a request for reconsideration. This was denied bypetitioner.During the pendency of respondent corporation's request forreconsideration, an investigation was conducted by the Bureau ofInternal Revenue in connection with the importations of wax andpetroleum that arrived in the country on or subsequent to the date ofthe ruling of January 28, 1977 and it was ascertained that respondentCorporation owes the government specific tax for importation of1,214,400 kilograms of paraffin wax on June 21, 1977 and August 17,1977 which gave rise to the letter of assessment dated May 8, 1978 forP275,652.00 re the subject matter in this case.Prior, however, to the issuance of the said letter of assessment of May8, 1978, petitioner in a letter dated January 11, 1978, grantedrespondent corporation's claim for refund or tax credit of the amount ofP321,436.79 since the importation which had arrived in Manila on April

18, 1975 was covered by the ruling of May 14, 1975 (before itsrevocation by the ruling of January 28, 1977).Respondent corporation protested the tax assessment of May 8,1978 inthe amount of P275,652.00 in a letter dated June 5, 1978 alleging thatcrude paraffin wax is subject to 7% advance sales tax pursuant topetitioner's ruling of May 14, 1975. The protest was denied bypetitioner in a letter dated February 15, 1980.During the pendency of the request of respondent corporation forreconsideration, it appealed to respondent Court of Tax Appeals (Annex"A", Rollo, pp. 26-35) and petitioner filed his answer on September 10,1980 (Annex "B", Rollo, pp. 3647).On May 21,1984, respondent Court of Tax Appeals rendered itsdecision, the dispositive portion of which reads as follows:WHEREFORE, the decision of the Commissioner of Internal Revenueappealed from is hereby reversed. Petitioner is not liable for specifictax on its importation of crude paraffin wax in the sum of P275,652.00imposed against petitioner, but only subject to the 7% advance sales taxwhich petitioner had already paid. Accordingly, respondent is herebyordered to refund or credit petitioner specific tax it paid in the sum ofP275,652.00. Without pronouncement as to costs.SO ORDERED.(p. 9, Decision; p. 46, Rollo)This was later amended to read:WHEREFORE the decision of the Commissioner of Internal Revenueappealed from is hereby reversed. Petitioner is not liable for specifictax on its importation of crude paraffin wax in the sum of P275,652.00imposed against petitioner but only subject to the 7% D advance salestax which petitioner had already paid. Without pro- announcement as tocosts.SO ORDERED.Hence, this petition filed on January 15, 1984 (Rollo, pp. 824).The sole issue raised by petitioner is whether or not respondentcorporation's importation of crude paraffin wax on June 21 and August17, 1977 are subject to specific tax under Section 142(i) of the TaxCode, as amended by P.D. No. 392, promulgated on February 18, 1974.Petitioner contends that the controlling interpretation is that given byCommissioner Plana and not that of Commissioner Vera.Petitioner further argues that respondent corporation's request forrefund of the amount of P321,436.79 was granted in the letter ofpetitioner dated January 11, 1978 because the importation of privaterespondent was made on April 18,1975 wherein petitioner made clearthat all importation of crude paraffin wax only after the ruling ofJanuary 28, 1977, is subject to specific tax prescribed in Section 142(i)of the Tax Code as amended by P.D. No. 392.

Moreover, the importation which gave rise to the assessment in the

amount of P275,652.00 subject of this case, was made on June 27, 1977and August 17, 1977 and that the petitioner's ruling of January 28,1977was not revoked or overruled by his letter of January 11, 1978 grantingrespondent corporation's request for refund of the amount ofP321,436.79.Petitioner's contention is completely meritorious.The Court of Tax Appeals' decision aptly stated:It will be starkly noted that in a ruling of respondent Commissioner ofInternal Revenue dated January 11, 1978 (p. 204, BIR Rec.), therequest for reconsideration of petitioner of the ruling holding it liablefor specific tax and for the tax credit of the sum of P321,436.79 paid asspecific tax was granted by the Commissioner of Internal Revenue. Ineffect, this ruling overrules that of January 28, 1977 holding petitionerliable for specific tax on its importations of crude paraffin wax. Theruling of January 11, 1978 having overruled that of January 28, 1977,the importations of crude paraffin made on June 21 and August 17,1977 ostensibly became once more subject to the ruling of May 14,1975 which held such importation of crude paraffin wax as not liable tospecific tax under the provisions of Section 142(i) of the NationalInternal Revenue Code, as amended by PD 392. In other words, therewas no other ruling which is prior to or was made to apply to theimportations of petitioner of crude paraffin wax on June 21 and August17, 1977, except only that ruling of the Commissioner of InternalRevenue of May 14, 1975 which applied Section 142(i), as amended byPD 392, of the National Revenue Code, which took effect on February18, 1974, and that this provision of Section 142(i), as amended, hasremained unchanged since then. It is clearly and legally justified toconclude that this ruling of the Commissioner of Internal Revenue ofMay 14, 1975 shall prospectively apply in favor of the importations ofcrude paraffin wax on June 21 and August 17, 1977 in question. This isthe ruling, which assured the taxpayer, Mega General MerchandisingCorporation, that for its importations of crude paraffin wax, it shall onlybe liable to 7% advance sales tax and no more. To make petitionerliable for specific tax after it has made the importations, would surelyprejudice petitioner as it would be subject to a tax liability of which theBureau of Internal Revenue has not made it fully aware. As a result, therulings of May 8, 1978 and February 15, 1980 having been issued longafter the importations on June 21 and August 1 7, 1977 in questioncannot be applied with legal effect in this case because to do so willviolate the prohibition against retroactive application of the rulings ofexecutive bodies. Rulings or circulars promulgated by theCommissioner of Internal Revenue, such as the rulings of January 28,1977 and those of May 8, 1978 and February 15, 1980, can not have

any retroactive application, where to do so, as it did in the case at bar,

would prejudice the taxpayer. (ABS-CBN Broadcasting Corp. vs. Courtof Tax Appeals & Com. of Int. Revenue, G.R. No. L-523b6, October 23,1981). Also, the re-enactment of Section 142(i) of the National InternalRevenue Code, as amended by PD 392, which provision of law hassubstantially remained unchanged is a clear indication that Congresshas adopted its prior executive construction and which means thatimported crude paraffin wax is not subject to specific tax thereunderpursuant to the BIR ruling dated May 14, 1975. (Alexander Howden &Co., Ltd. vs. Coll. of Int. Rev., 13 SCRA 601). (pp. 11-13, Petition; pp.18-20, Rollo)Contrary to the Court of Tax Appeals' ruling, We believe that the letterof Commissioner Plana dated January 11, 1978 did not in any wayrevoke his ruling dated January 28,1977 which ruling applied thespecific tax to wax (without distinction). The reason he removed in1978 private respondent's liability for the specific tax was NOT (aserroneously pointed out by the Court of Tax Appeals) because hewanted to revoke, expressly or implicitly, his ruling of January 28, 1977but because the P321,436.79 tax referred to importation BEFOREJanuary 28, 1977 and hence still covered by the ruling of CommissionerVera, and not by the January 28,1977 ruling of Commissioner Plana.PREMISES CONSIDERED, the decision of the Court of Tax Appeals ishereby REVERSED and SET ASIDE, and the private respondent isordered to pay the tax as assessed by the Commissioner of InternalRevenue, together with interest. No costs.SO ORDERED.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-14880April 29, 1960COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.FILIPINAS COMPAIA DE SEGUROS, respondent.Assistant Solicitor General Jose P. Alejandro and Special Attorney JaimeM. Maza for petitioner.Ramon T. Garcia for respondent.BARRERA, J.:Respondent Filipinas Compaia de Seguros, an insurance company, isalso engaged in business as a real estate dealer. On January 4, 1956,respondent, in accordance with the single rate then prescribed underSection 182 of the National Internal Revenue Code. 1 paid the amount ofP150.00 as real estate dealer's fixed annual tax for the year 1956.Subsequently said Section 182 of the Code was amended by Republic

Act No. 1612, which took effect on August 24, 1956, by providing asmall of graduated rates: P150 if the annual income of the real estatedealer from his business as such is P4,000, but does not exceedP10,000; P300, if such annual income exceeds P10,000 but does notexceed P30,000; and P500 if such annual income exceeds P30,000.On June 17, 1957, petitioner Commissioner of Internal Revenueassessed and demanded from respondent (whose annual incomeexceeded P30,000.00) the amount of P350.00 as additional real estatedealer's fixed annual tax for the year 1956. On July 16, 1957,respondent wrote a letter to petitioner stating that the "records willshow that the real estate dealer's fixed tax for 1956 of this Companywas fully paid by us prior to the effectivity of Republic Act No. 1612which amended, among other things, Sections 178 and 192 of theNational Internal Revenue Code." And, as to the retroactive effect ofsaid Republic Act No. 1612, respondent added that the Republic ActNo. 1856 which, among other things, amended Section 182 of theNational Internal Revenue Code, Congress has clearly shown itsintention when it provided that the increase in rates of taxes envisionedby Republic Act No. 1612 is to be made effective as of 1 January 1957".On October 23, 1957, petitioner informed respondent that "RepublicAct No. 1856 which took effect June 22, 1957 amended the date ofeffectivity of Republic Act 1612 to January 1, 1957. However, the saidamendment applies only to fixed taxes on occupation and not to fixedtaxes on business." Hence, petitioner insisted that respondent shouldpay the amount of P350.00 as additional real estate dealer's fixedannual tax for the year 1956.On November 20, 1957, respondent filed with the Court of Tax Appealsa petition for review. To this petition, petitioner filed his answer onDecember 6, 1957. As petitioner practically admitted the materialfactual allegations in the petition for review, the case was submitted forjudgment on the pleadings. On November 22, 1958, the Court of TaxAppeals rendered a decision sustaining the contention of respondentcompany and ordering the petitioner Commissioner of Internal Revenueto desist from collecting the P350.00 additional assessment. From thisdecision, petitioner appealed to us.As a rule, laws have no retroactive effect, unless the contrary isprovided. (Art. 4, Civil Code of the Philippines; Manila Trading andSupply Co. vs. Santos, et al., 66 Phil., 237; La Provisora Filipina vs.Ledda, 66 Ph 573.) Otherwise stated, a state should be consider asprospective in its operation whether it enacts, amen or repeals a tax,unless the language of the statute clearly demands or expresses that itshall have a retroactive effect (61 C. J. 1602, cited in Loremo vs.Posadas, 64 Phi 353.) The rule applies with greater force to the casebar, considering that Republic Act No. 1612, which imposes the new

and higher rates of real estate dealer's annual fixed tax, expresslyprovides in Section 21 thereof the said Act "shall take effect upon itsapproval" on August 24, 1956.The instant case involves the fixed annual real estate dealer's tax for1956. There is no dispute that before the enactment of Republic ActNo. 1612 on August 2 1956, the uniform fixed annual real estatedealer's was P150.00 for all owners of rental properties receiving anaggregate amount of P3,000.00 or more a year in the form of rentals 2and that. "the yearly fixed taxes are due on the first of January of eachyear" unless tendered in semi-annual or quarterly installments. Sincethe petitioner indisputably paid in full on January 4, 1956, the totalannual tax then prescribed for the year 1956, require it to pay anadditional sum of P350.00 to complete the P500.00 provided inRepublic Act No. 1612 which became effective by its very terms only onAugust 24 1956, would, in the language of the Court of Tax Appealsresult in the imposition upon respondent of a tax burden to which itwas not liable before the enactment of said amendatory act, thusrendering its operation retroactive rather than prospective, whichcannot be done, as it would contravene the aforecited Section 21 ofRepublic Act No. 1612 as well as the established rule regardingprospectivity of operation of statutes. The view that Congress didintend to impose said increased rates of real estate dealer's annual taxprospectively and not retroactively, finds some affirmation in RepublicAct No. 1856, approved on June 22, 1957, which fixed the effective dateof said new rates under Republic Act No. 1612 by inserting thefollowing proviso in Section 182 of the National Internal Revenue Code:Provided, further, That any amount collected in excess of the rates ineffect prior to January one, nineteen hundred and fifty-seven, shall berefunded or credited to the taxpayer concerned subject to theprovisions of section three hundred and nine of this Code. (Sec. 182 (b)(2) (1).)Petitioner, however, contends that the above-quoted provision refersonly to fixed taxes on occupation and does not cover fixed taxes onbusiness, such as the real estate dealer's fixed tax herein involved. Thisis technically correct, but we note from the deliberations in the Senate,where the proviso in question was introduced as an amendment, thatsaid House Bill No. 5919 which became Republic Act No. 1856 wasconsidered, amended, and enacted into law, in order precisely that the"iniquitous effects" which were then being felt by taxpayers. in general,on account of the approval of Republic Act No. 1612, Which was beinggiven retroactive effect by the Bureau of Internal Revenue by collectingthese taxes retroactively from January 1, 1956, be eliminated andcomplaints against such action be finally settled. (See SenateCongressional Record, May 4, 1957, pp. 10321033.)

It is also to be observed that said House Bill No. 5819 as originally

presented, was expressly intended to amend certain provisions of theNational Internal Revenue Code dealing on fixed taxes on business. Theprovisions in respect of fixed tax on occupation were merelysubsequently added. This would seem to indicate that the proviso inquestion was intended to cover not only fixed taxes on occupation, butalso fixed taxes on business. (Senate Congressional Record, March 7,1957, p. 444.)The fact that said proviso was placed only at the end ofparagraph "(B) On occupation" is not, therefore, view of thecircumstances, decisive and unmistakable indication that Congresslimited the proviso to occupation taxes. Even though the primarypurpose of the proviso is to limit restrain the general language of astatute, the legislature, unfortunately, does not always use it withtechnical correctness; consequently, where its use creates anambiguity, it is the duty of the court to ascertain the legislativeintention, through resort to usual rules of construction applicable tostatutes, generally an give it effect even though the statute is therebyenlarged, or the proviso made to assume the force of an independentenactment and although a proviso as such has no existence apart fromprovision which it is designed to limit or to qualify. (StatutoryConstruction by E. T. Crawford, pp. 604-605.). . . When construing a statute, the reason for its enactment should bekept in mind, and the statute should be construe with reference to itsintended scope and purpose. (Id. at p. 249.)On the general principle of prospectivity of statute on the language ofRepublic Act 1612 itself, especially Section 21 thereof, and on the basisof its intended scope and purpose as disclosed in the CongressionalRecord we find ourselves in agreement with the Court of Tax Appeals.Wherefore, the decision appealed from is hereby affirmed withoutcosts. So ordered.Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. L-29059 December 15, 1987COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.CEBU PORTLAND CEMENT COMPANY and COURT OF TAXAPPEALS, respondents.CRUZ, J.:By virtue of a decision of the Court of Tax Appeals rendered on June 21,1961, as modified on appeal by the Supreme Court on February 27,1965, the Commissioner of Internal Revenue was ordered to refund to

the Cebu Portland Cement Company the amount of P 359,408.98,

representing overpayments of ad valorem taxes on cement producedand sold by it after October 1957.On March 28, 1968, following denial of motions for reconsiderationfiled by both the petitioner and the private respondent, the lattermoved for a writ of execution to enforce the said judgment.The motion was opposed by the petitioner on the ground that theprivate respondent had an outstanding sales tax liability to which thejudgment debt had already been credited. In fact, it was stressed, therewas still a balance owing on the sales taxes in the amount of P4,789,279.85 plus 28% surcharge.On April 22, 1968, the Court of Tax Appeals * granted the motion,holding that the alleged sales tax liability of the private respondent wasstill being questioned and therefore could not be set-off against therefund.In his petition to review the said resolution, the Commissioner ofInternal Revenue claims that the refund should be charged against thetax deficiency of the private respondent on the sales of cement underSection 186 of the Tax Code. His position is that cement is amanufactured and not a mineral product and therefore not exempt fromsales taxes. He adds that enforcement of the said tax deficiency wasproperly effected through his power of distraint of personal propertyunder Sections 316 and 318 of the said Code and, moreover, thecollection of any national internal revenue tax may not be enjoinedunder Section 305, subject only to the exception prescribed in Rep. ActNo. 1125. This is not applicable to the instant case. The petitioner alsodenies that the sales tax assessments have already prescribed becausethe prescriptive period should be counted from the filing of the salestax returns, which had not yet been done by the private respondent.For its part, the private respondent disclaims liability for the salestaxes, on the ground that cement is not a manufactured product but amineral product. As such, it was exempted from sales taxes underSection 188 of the Tax Code after the effectivity of Rep. Act No. 1299on June 16, 1955, in accordance with Cebu Portland Cement Co. v.Collector of Internal Revenue, decided in 1968. Here Justice EugenioAngeles declared that "before the effectivity of Rep. Act No. 1299,amending Section 246 of the National Internal Revenue Code, cementwas taxable as a manufactured product under Section 186, inconnection with Section 194(4) of the said Code," thereby implying thatit was not considered a manufactured product afterwards. Also, thealleged sales tax deficiency could not as yet be enforced against itbecause the tax assessment was not yet final, the same being still underprotest and still to be definitely resolved on the merits. Besides, theassessment had already prescribed, not having been made within the

reglementary five-year period from the filing of the tax returns.

Our ruling is that the sales tax was properly imposed upon the privaterespondent for the reason that cement has always been considered amanufactured product and not a mineral product. This matter wasextensively discussed and categorically resolved in Commissioner ofInternal Revenue v. Republic Cement Corporation, decided on August10, 1983, where Justice Efren L. Plana, after an exhaustive review ofthe pertinent cases, declared for a unanimous Court:From all the foregoing cases, it is clear that cement qua cement wasnever considered as a mineral product within the meaning of Section246 of the Tax Code, notwithstanding that at least 80% of itscomponents are minerals, for the simple reason that cement is theproduct of a manufacturing process and is no longer the mineralproduct contemplated in the Tax Code (i.e.; minerals subjected tosimple treatments) for the purpose of imposing the ad valorem tax.What has apparently encouraged the herein respondents to maintaintheir present posture is the case of Cebu Portland Cement Co. v.Collector of Internal Revenue, L-20563, Oct. 29, 1968 (28 SCRA 789)penned by Justice Eugenio Angeles. For some portions of that decisiongive the impression that Republic Act No. 1299, which amendedSection 246, reclassified cement as a mineral product that was notsubject to sales tax. ...After a careful study of the foregoing, we conclude that reliance on thedecision penned by Justice Angeles is misplaced. The said decision is noauthority for the proposition that after the enactment of Republic ActNo. 1299 in 1955 (defining mineral product as things with at least 80%mineral content), cement became a 'mineral product," as distinguishedfrom a "manufactured product," and therefore ceased to be subject tosales tax. It was not necessary for the Court to so rule. It was enoughfor the Court to say in effect that even assuming Republic Act No. 1299had reclassified cement was a mineral product, the reclassificationcould not be given retrospective application (so as to justify the refundof sales taxes paid before Republic Act 1299 was adopted) becauselaws operate prospectively only, unless the legislative intent to thecontrary is manifest, which was not so in the case of Republic Act 1266.[The situation would have been different if the Court instead had ruledin favor of refund, in which case it would have been absolutelynecessary (1) to make an unconditional ruling that Republic Act 1299re-classified cement as a mineral product (not subject to sales tax), and(2) to declare the law retroactive, as a basis for granting refund of salestax paid before Republic Act 1299.]In any event, we overrule the CEPOC decision of October 29, 1968(G.R. No. L-20563) insofar as its pronouncements or any implicationtherefrom conflict with the instant decision.

The above views were reiterated in the resolution denying

reconsideration of the said decision, thus:The nature of cement as a "manufactured product" (rather than a"mineral product") is well settled. The issue has repeatedly presenteditself as a threshold question for determining the basis for computingthe ad valorem mining tax to be paid by cement Companies. Nopronouncement was made in these cases that as a "manufacturedproduct" cement is subject to sales tax because this was not at issue.The decision sought to be reconsidered here referred to the legislativehistory of Republic Act No. 1299 which introduced a definition of theterms "mineral" and "mineral products" in Sec. 246 of the Tax Code.Given the legislative intent, the holding in the CEPOC case (G.R. No. L20563) that cement was subject to sales tax prior to the effectivity ofRepublic Act No. 1299 cannot be construed to mean that, after the lawtook effect, cement ceased to be so subject to the tax. To erase any andall misconceptions that may have been spawned by reliance on the caseof Cebu Portland Cement Co. v. Collector of Internal Revenue, L-20563,October 29, 1968 (28 SCRA 789) penned by Justice Eugenio Angeles,the Court has expressly overruled it insofar as it may conflict with thedecision of August 10, 1983, now subject of these motions forreconsideration.On the question of prescription, the private respondent claims that thefive-year reglementary period for the assessment of its tax liabilitystarted from the time it filed its gross sales returns on June 30, 1962.Hence, the assessment for sales taxes made on January 16, 1968 andMarch 4, 1968, were already out of time. We disagree. This contentionmust fail for what CEPOC filed was not the sales returns required inSection 183(n) but the ad valorem tax returns required under Section245 of the Tax Code. As Justice Irene R. Cortes emphasized in theaforestated resolution:In order to avail itself of the benefits of the five-year prescription periodunder Section 331 of the Tax Code, the taxpayer should have filed therequired return for the tax involved, that is, a sales tax return. (ButuanSawmill, Inc. v. CTA, et al., G.R. No. L-21516, April 29, 1966, 16 SCRA277). Thus CEPOC should have filed sales tax returns of its gross salesfor the subject periods. Both parties admit that returns were made forthe ad valorem mining tax. CEPOC argues that said returns contain theinformation necessary for the assessment of the sales tax. TheCommissioner does not consider such returns as compliance with therequirement for the filing of tax returns so as to start the running of thefive-year prescriptive period.We agree with the Commissioner. It has been held in Butuan SawmillInc. v. CTA, supra, that the filing of an income tax return cannot beconsidered as substantial compliance with the requirement of filing

sales tax returns, in the same way that an income tax return cannot beconsidered as a return for compensating tax for the purpose ofcomputing the period of prescription under Sec. 331. (Citing BisayaLand Transportation Co., Inc. v. Collector of Internal Revenue, G.R.Nos. L-12100 and L-11812, May 29, 1959). There being no sales taxreturns filed by CEPOC, the statute of stations in Sec. 331 did not beginto run against the government. The assessment made by theCommissioner in 1968 on CEPOC's cement sales during the period fromJuly 1, 1959 to December 31, 1960 is not barred by the five-yearprescriptive period. Absent a return or when the return is false orfraudulent, the applicable period is ten (10) days from the discovery ofthe fraud, falsity or omission. The question in this case is: When wasCEPOC's omission to file that return deemed discovered by thegovernment, so as to start the running of said period?The argument that the assessment cannot as yet be enforced because itis still being contested loses sight of the urgency of the need to collecttaxes as "the lifeblood of the government." If the payment of taxescould be postponed by simply questioning their validity, the machineryof the state would grind to a halt and all government functions wouldbe paralyzed. That is the reason why, save for the exception alreadynoted, the Tax Code provides:Sec. 291. Injunction not available to restrain collection of tax. Nocourt shall have authority to grant an injunction to restrain thecollection of any national internal revenue tax, fee or charge imposedby this Code.It goes without saying that this injunction is available not only when theassessment is already being questioned in a court of justice but more soif, as in the instant case, the challenge to the assessment is still-andonly-on the administrative level. There is all the more reason to applythe rule here because it appears that even after crediting of the refundagainst the tax deficiency, a balance of more than P 4 million is still duefrom the private respondent.To require the petitioner to actually refund to the private respondentthe amount of the judgment debt, which he will later have the right todistrain for payment of its sales tax liability is in our view an Idle ritual.We hold that the respondent Court of Tax Appeals erred in orderingsuch a charade.WHEREFORE, the petition is GRANTED. The resolution dated April 22,1968, in CTA Case No. 786 is SET ASIDE, without any pronouncementas to costs.SO ORDERED.Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.

Republic of the Philippines

SUPREME COURTManilaFIRST DIVISIONG.R. No. L-52306 October 12, 1981ABS-CBN BROADCASTING CORPORATION, petitioner,vs.COURT OF TAX APPEALS and THE COMMISSIONER OFINTERNAL REVENUE, respondents.MELENCIO-HERRERA, J.:This is a Petition for Review on certiorari of the Decision of the Court ofTax Appeals in C.T.A. Case No. 2809, dated November 29, 1979, whichaffirmed the assessment by the Commissioner of Internal Revenue,dated April 16, 1971, of a deficiency withholding income tax againstpetitioner, ABS-CBN Broadcasting Corporation, for the years 1965,1966, 1967 and 1968 in the respective amounts of P75,895.24,P99,239.18, P128,502.00 and P222, 260.64, or a total of P525,897.06.During the period pertinent to this case, petitioner corporation wasengaged in the business of telecasting local as well as foreign filmsacquired from foreign corporations not engaged in trade or businesswithin the Philippines. for which petitioner paid rentals afterwithholding income tax of 30%of one-half of the film rentals.In so far as the income tax on non-resident corporations is concerned,section 24 (b) of the National Internal Revenue Code, as amended byRepublic Act No. 2343 dated June 20, 1959, used to provide:(b) Tax on foreign corporations.(1) Non-resident corporations.There shall be levied, collected, and paid for each taxable year, in lieuof the tax imposed by the preceding paragraph, upon the amountreceived by every foreign corporation not engaged in trade or businesswithin the Philippines, from an sources within the Philippines, asinterest, dividends, rents, salaries, wages, premiums, annuities,compensations, remunerations, emoluments, or other fixed ordeterminable annual or periodical gains, profits, and income, a taxequal to thirty per centum of such amount. (Emphasis supplied)On April 12, 1961, in implementation of the aforequoted provision, theCommissioner of Internal Revenue issued General Circular No. V-334reading thus:In connection with Section 24 (b) of Tax Code, the amendmentintroduced by Republic Act No. 2343, under which an income tax equalto 30% is levied upon the amount received by every foreign corporationnot engaged in trade or business within the Philippines from all sourceswithin this country as interest, dividends, rents, salaries, wages,premiums, annuities, compensations, remunerations, emoluments, orother fixed or determinable annual or periodical gains, profits, and

income, it has been determined that the tax is still imposed on incomederived from capital, or labor, or both combined, in accordance with thebasic principle of income taxation (Sec. 39, Income Tax Regulations),and that a mere return of capital or investment is not income (Par. 5,06,1 Mertens Law of Federal 'Taxation). Since according to the findings ofthe Special Team who inquired into business of the non-resident foreignfilm distributors, the distribution or exhibition right on a film isinvariably acquired for a consideration, either for a lump sum or apercentage of the film rentals, whether from a parent company or anindependent outside producer, apart of the receipts of a non-residentforeign film distributor derived from said film represents, therefore, areturn of investment.4. The local distributor should withhold 30% of one-half of the filmrentals paid to the non-resident foreign film distributor and pay thesame to this office in accordance with law unless the non- residentforeign film distributor makes a prior settlement of its income taxliability. (Emphasis ours).Pursuant to the foregoing, petitioner dutifully withheld and turned overto the Bureau of Internal Revenue the amount of 30% of one-half of thefilm rentals paid by it to foreign corporations not engaged in trade orbusiness within the Philippines. The last year that petitioner withheldtaxes pursuant to the foregoing Circular was in 1968.On June 27, 1968, Republic Act No. 5431 amended Section 24 (b) of theTax Code increasing the tax rate from 30 % to 35 % and revising the taxbasis from "such amount" referring to rents, etc. to "gross income," asfollows:(b) Tax on foreign corporations.(1) Non-resident corporations.Aforeign corporation not engaged in trade or business in the Philippinesincluding a foreign life insurance company not engaged in the lifeinsurance business in the Philippines shall pay a tax equal to thirty-fiveper cent of the gross income received during each taxable year from allsources within the Philippines, as interests, dividends, rents, royalties,salaries, wages, premiums, annuities, compensations, remunerationsfor technical services or otherwise, emoluments or other fixed ordeterminable annual, periodical or casual gains, profits, and income,and capital gains, Provided however, That premiums shah not includereinsurance premiums. (Emphasis supplied)On February 8, 1971, the Commissioner of Internal Revenue issuedRevenue Memorandum Circular No. 4-71, revoking General CircularNo. V-334, and holding that the latter was "erroneous for lack of legalbasis," because "the tax therein prescribed should be based on grossincome without deduction whatever," thus:After a restudy and analysis of Section 24 (b) of the National InternalRevenue Code, as amended by Republic Act No. 5431, and guided by

the interpretation given by tax authorities to a similar provision in the

Internal Revenue Code of the United States, on which theaforementioned provision of our Tax Code was patterned, this Officehas come to the conclusion that the tax therein prescribed should bebased on gross income without t deduction whatever. Consequently, theruling in General Circular No. V-334, dated April 12, 1961, allowing thededuction of the proportionate cost of production or exhibition ofmotion picture films from the rental income of non- resident foreigncorporations, is erroneous for lack of legal basis.In view thereof, General Circular No. V-334, dated April 12, 1961, ishereby revoked and henceforth, local films distributors and exhibitorsshall deduct and withhold 35% of the entire amount payable by them tonon-resident foreign corporations, as film rental or royalty, or whateversuch payment may be denominated, without any deduction whatever,pursuant to Section 24 (b), and pay the withheld taxes in accordancewith Section 54 of the Tax Code, as amended.All rulings inconsistent with this Circular is likewise revoked.(Emphasis ours)On the basis of this new Circular, respondent Commissioner of InternalRevenue issued against petitioner a letter of assessment and demanddated April 15, 1971, but allegedly released by it and received bypetitioner on April 12, 1971, requiring them to pay deficiencywithholding income tax on the remitted film rentals for the years 1965through 1968 and film royalty as of the end of 1968 in the total amountof P525,897.06 computed as follows:1965Total amount remitted

P 511,059.48

Withholding tax due thereon

153,318.00

Less: Amount already assessed

89,000.00

Balance

P64,318.00

Add: 1/2% mo. int. fr. 4-16-66 to 4-16-69

11,577.24

Total amount due & collectible

P 75,895.24

1966Total amount remitted

P373,492.24

Withholding tax due thereon

112,048.00

Less: Amount already assessed

27,947.00

Balance

84,101.00

Add: 11/2%mo. int. fr. 4-16-67 to 4-116-70

15,138.18

Total amount due & collectible

P99,239.18

1967Total amount remitted

P601,160.65

Withholding tax due thereon

180,348.00

Less: Amount already assessed

71,448.00

Balance

108,900.00

Add: 1/2% mo. int. fr. 4-16-68 to 4-16-71

19,602.00

Total amount due & collectible

P128,502.00

1968Total amount remitted

P881,816.92

Withholding tax due thereon

291,283.00

Less: Amount already assessed

92,886.00

Balance

P198,447.00

Add: 1/2% mo. int. fr. 4-16-69 to 4-29-71

23,813.64

Total amount due & collectible

P222,260.44

On May 5, 1971, petitioner requested for a reconsideration and

withdrawal of the assessment. However, without acting thereon,respondent, on April 6, 1976, issued a warrant of distraint and levyover petitioner's personal as well as real properties. The petitioner thenfiled its Petition for Review with the Court of Tax Appeals whoseDecision, dated November 29, 1979, is, in turn, the subject of thisreview. The Tax Court held:

For the reasons given, the Court finds the assessment issued byrespondent on April 16, 1971 against petitioner in the amounts ofP75,895.24, P 99,239.18, P128,502.00 and P222,260.64 or a total ofP525,897.06 as deficiency withholding income tax for the years 1965,1966, 1967 and 1968, respectively, in accordance with law. As prayedfor, the petition for review filed in this case is dismissed, and petitionerABS-CBN Broadcasting Corporation is hereby ordered to pay the sumof P525,897.06 to respondent Commissioner of Internal Revenue asdeficiency withholding income tax for the taxable years 1965 thru 1968,plus the surcharge and interest which have accrued thereon incident todelinquency pursuant to Section 51 (e) of the National InternalRevenue Code, as amended.WHEREFORE, the decision appealed from is hereby affirmed atpetitioner's cost.SO ORDERED.The issues raised are two-fold:I. Whether or not respondent can apply General Circular No. 4-71retroactively and issue a deficiency assessment against petitioner in theamount of P 525,897.06 as deficiency withholding income tax for theyears 1965, 1966, 1967 and 1968.II. Whether or not the right of the Commissioner of Internal Revenue toassess the deficiency withholding income tax for the year 196,5 hasprescribed.Upon the facts and circumstances of the case, review is warranted.In point is Sec. 338-A (now Sec. 327) of the Tax Code. As inserted byRepublic Act No. 6110 on August 9, 1969, it provides:Sec. 338-A. Non-retroactivity of rulings. Any revocation,modification, or reversal of and of the rules and regulationspromulgated in accordance with the preceding section or any of therulings or circulars promulgated by the Commissioner of InternalRevenue shall not be given retroactive application if the relocation,modification, or reversal will be prejudicial to the taxpayers, except inthe following cases: (a) where the taxpayer deliberately mis-states oromits material facts from his return or any document required of himby the Bureau of Internal Revenue: (b) where the facts subsequentlygathered by the Bureau of Internal Revenue are materially differentfrom the facts on which the ruling is based; or (c) where the taxpayeracted in bad faith. (italics for emphasis)It is clear from the foregoing that rulings or circulars promulgated bythe Commissioner of Internal Revenue have no retroactive applicationwhere to so apply them would be prejudicial to taxpayers. Theprejudice to petitioner of the retroactive application of MemorandumCircular No. 4-71 is beyond question. It was issued only in 1971, orthree years after 1968, the last year that petitioner had withheld taxes

under General Circular No. V-334. The assessment and demand on

petitioner to pay deficiency withholding income tax was also madethree years after 1968 for a period of time commencing in 1965.Petitioner was no longer in a position to withhold taxes due fromforeign corporations because it had already remitted all film rentalsand no longer had any control over them when the new Circular wasissued. And in so far as the enumerated exceptions are concerned,admittedly, petitioner does not fall under any of them.Respondent claims, however, that the provision on non-retroactivity isinapplicable in the present case in that General Circular No. V-334 is anullity because in effect, it changed the law on the matter. The Court ofTax Appeals sustained this position holding that: "Deductions arewholly and exclusively within the power of Congress or the law-makingbody to grant, condition or deny; and where the statute imposes a taxequal to a specified rate or percentage of the gross or entire amountreceived by the taxpayer, the authority of some administrative officialsto modify or change, much less reduce, the basis or measure of the taxshould not be read into law." Therefore, the Tax Court concluded,petitioner did not acquire any vested right thereunder as the same wasa nullity.The rationale behind General Circular No. V-334 was clearly statedtherein, however: "It ha(d) been determined that the tax is still imposedon income derived from capital, or labor, or both combined, inaccordance with the basic principle of income taxation ...and that amere return of capital or investment is not income ... ." "A part of thereceipts of a non-resident foreign film distributor derived from said filmrepresents, therefore, a return of investment." The Circular thus fixedthe return of capital at 50% to simplify the administrative chore ofdetermining the portion of the rentals covering the return of capital."Were the "gross income" base clear from Sec. 24 (b), perhaps, theratiocination of the Tax Court could be upheld. It should be noted,however, that said Section was not too plain and simple to understand.The fact that the issuance of the General Circular in question wasrendered necessary leads to no other conclusion than that it was noteasy of comprehension and could be subjected to differentinterpretations.In fact, Republic Act No. 2343, dated June 20, 1959, supra, which wasthe basis of General Circular No. V-334, was just one in a series ofenactments regarding Sec. 24 (b) of the Tax Code. Republic Act No.3825 came next on June 22, 1963 without changing the basis butmerely adding a proviso (in bold letters).(b) Tax on foreign corporation.(1) Non-resident corporations. Thereshall be levied, collected and paid for each taxable year, in lieu of thetax imposed by the preceding paragraph, upon the amount received by

every foreign corporation not engaged in trade or business within the

Philippines, from all sources within the Philippines, as interest,dividends, rents, salaries, wages, premiums annuities, compensations,remunerations, emoluments, or other fixed or determinable annual orperiodical gains, profits, and income, a tax equal to thirty per centumof such amount: PROVIDED, HOWEVER, THAT PREMIUMS SHALLNOT INCLUDE REINSURANCE PREMIUMS. (double emphasis ours).Republic Act No. 3841, dated likewise on June 22, 1963, followed after,omitting the proviso and inserting some words (also in bold letters).(b) Tax on foreign corporations.(1) Non-resident corporations.Thereshall be levied, collected and paid for each taxable year, in lieu of thetax imposed by the preceding paragraph, upon the amount received byevery foreign corporation not engaged in trade or business within thePhilippines, from all sources within the Philippines, as interest,dividends, rents, salaries, wages, premiums, annuities, compensations,remunerations, emoluments, or other fixed or determinable annual orperiodical OR CASUAL gains, profits and income, AND CAPITALGAINS, a tax equal to thirty per centum of such amount. (doubleemphasis supplied)The principle of legislative approval of administrative interpretation byre-enactment clearly obtains in this case. It provides that "the reenactment of a statute substantially unchanged is persuasive indicationof the adoption by Congress of a prior executive construction. Noteshould be taken of the fact that this case involves not a mere opinion ofthe Commissioner or ruling rendered on a mere query, but a Circularformally issued to "all internal revenue officials" by the thenCommissioner of Internal Revenue.It was only on June 27, 1968 under Republic Act No. 5431, supra, whichbecame the basis of Revenue Memorandum Circular No. 4-71, that Sec.24 (b) was amended to refer specifically to 35% of the "gross income."This Court is not unaware of the well-entrenched principle that theGovernment is never estopped from collecting taxes because ofmistakes or errors on the part of itsagents. In fact, utmost caution should be taken in this regard. But, likeother principles of law, this also admits of exceptions in the interest ofjustice and fairplay. The insertion of Sec. 338-A into the NationalInternal Revenue Code, as held in the case of Tuason, Jr. vs. Lingad, isindicative of legislative intention to support the principle of good faith.In fact, in the United States, from where Sec. 24 (b) was patterned, ithas been held that the Commissioner of Collector is precluded fromadopting a position inconsistent with one previously taken whereinjustice would result therefrom, or where there has been amisrepresentation to the taxpayer.

We have also noted that in its Decision, the Court of Tax Appealsfurther required the petitioner to pay interest and surcharge asprovided for in Sec. 51 (e) of the Tax Code in addition to the deficiencywithholding tax of P 525,897.06. This additional requirement is muchless called for because the petitioner relied in good faith and religiouslycomplied with no less than a Circular issued "to all internal revenueofficials" by the highest official of the Bureau of Internal Revenue andapproved by the then Secretary of Finance.With the foregoing conclusions arrived at, resolution of the issue ofprescription becomes unnecessary.WHEREFORE, the judgment of the Court of Tax Appeals is herebyreversed, and the questioned assessment set aside. No costs.SO ORDERED.Makasiar (Acting Chairman), Fernandez, Guerrero and De Castro, * JJ.,concur.FIRST DIVISION[G.R. No. 117982. February 6, 1997]COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.COURT OF APPEALS, COURT OF APPEALS and ALHAMBRAINDUSTRIES, INC., respondents.DECISIONBELLOSILLO, J.:ALHAMBRA INDUSTRIES, INC., is a domestic corporation engaged inthe manufacture and sale of cigar and cigarette products. On 7 May1991 private respondent received a letter dated 26 April 1991 from theCommissioner of Internal Revenue assessing it deficiency Ad ValoremTax (AVT) in the total amount of Four Hundred Eighty-Eight ThousandThree Hundred Ninety-Six Pesos and Sixty-Two Centavos (P488,396.62), inclusive of increments, on the removals of cigaretteproducts from their place of production during the period 2 November1990 to 22 January 1991.Petitioner computes the deficiency thus Total AVT due per manufacturers declaration P4, 279,042.33Less: AVT paid under BIR Ruling No. 473-88 3, 905,348.85Deficiency AVT 373,693.48Add: Penalties:25% Surcharge (Sec. 248[c][3] NIRC) 93,423.3720% Interest (P 467,116.85 x 82/360 days) 21,279.77Total Amount Due P 488,396.62In a letter dated 22 May 1991 received by petitioner on even date,private respondent thru counsel filed a protest against the proposedassessment with a request that the same be withdrawn and cancelled.On 31 May 1991 private respondent received petitioner's reply dated27 May 1991 denying its protest and request for cancellation stating

that the decision was final, and at the same time requesting payment ofthe revised amount of Five Hundred Twenty Thousand Eight HundredThirty-Five Pesos and Twenty-Nine Centavos (P 520,835.29), withinterest updated, within ten (10) days from receipt thereof. In a letterdated 10 June 1991 which petitioner received on the same day, privaterespondent requested for the reconsideration of petitioner's denial ofits protest. Without waiting for petitioner's reply to its request forreconsideration, private respondent filed on 19 June 1991 a petition forreview with the Court of Tax Appeals. On 25 June 1991 privaterespondent received from petitioner a letter dated 21 June 1991denying its request for reconsideration declaring again that its decisionwas final. On 8 July 1991 private respondent paid under protest thedisputed ad valorem tax in the sum of P 520,835.29.In its Decision of 1 December 1993 the Court of Tax Appeals orderedpetitioner to refund to private respondent the amount of Five HundredTwenty Thousand Eight Hundred Thirty-Five Pesos and Twenty-NineCentavos (P 520,835.29) representing erroneously paid ad valorem taxfor the period 2 November 1990 to 22 January 1991.The Court of Tax Appeals explained that the subject deficiency excisetax assessment resulted from private respondents use of thecomputation mandated by BIR Ruling 473-88 dated 4 October 1988 asbasis for computing the fifteen percent (15%) ad valorem tax due on itsremovals of cigarettes from 2 November 1990 to 22 January 1991. BIRCircular 473-88 was issued by Deputy Commissioner Eufracio D. Santosto Insular-Yebana Tobacco Corporation allowing the latter to excludethe value-added tax (VAT) in the determination of the gross sellingprice for purposes of computing the ad valorem tax of its cigar andcigarette products in accordance with Sec. 127 of the Tax Code asamended by Executive Order No. 273 which provides as follows:Sec. 127. Payment of excise taxes on domestic products. - x x x x (b)Determination of gross selling price of goods subject to ad valorem tax.- Unless otherwise provided, the price, excluding the value-added tax,at which the goods are sold at wholesale in the place of production orthrough their sales agents to the public shall constitute the grossselling price.The computation, pursuant to the ruling, is illustrated by way ofexample thus P44.00 x 1/11 = P 4.00 VATP44.00 - P 4.00 = P40.00 price without VATP40.00 x 15% = P 6.00 Ad Valorem TaxFor the period 2 November 1990 to 22 January 1991 private respondentpaid P3,905,348.85 ad valorem tax, applying Sec. 127 (b) of the NIRCas interpreted by BIR Ruling 473-88 by excluding the VAT in thedetermination of the gross selling price.

Thereafter, on 11 February 1991, petitioner issued BIR Ruling 017-91

to Insular-Yebana Tobacco Corporation revoking BIR Ruling 473-88 forbeing violative of Sec. 142 of the Tax Code. It included back the VAT tothe gross selling price in determining the tax base for computing the advalorem tax on cigarettes. Cited as basis by petitioner is Sec. 142 of theTax Code, as amended by E.O. No. 273 Sec. 142. Cigar and cigarettes - x x x x For purposes of this section,manufacturer's or importer's registered wholesale price shall includethe ad valorem tax imposed in paragraphs (a), (b), (c) or (d) hereof andthe amount intended to cover the value added tax imposed under TitleIV of this Code.Petitioner sought to apply the revocation retroactively to privaterespondent's removals of cigarettes for the period starting 2 November1990 to 22 January 1991 on the ground that private respondentallegedly acted in bad faith which is an exception to the rule on nonretroactivity of BIR Rulings.On appeal, the Court of Appeals affirmed the Court of Tax Appealsholding that the retroactive application of BIR Ruling 017-91 cannot beallowed since private respondent did not act in bad faith; privaterespondents computation under BIR Ruling 473-88 was not shown to bemotivated by ill will or dishonesty partaking the nature of fraud; hence,this petition.Petitioner imputes error to the Court of Appeals: (1) in failing toconsider that private respondents reliance on BIR Ruling 473-88 beingcontrary to Sec. 142 of the Tax Code does not confer vested rights toprivate respondent in the computation of its ad valorem tax; (2) infailing to consider that good faith and prejudice to the taxpayer incases of reliance on a void BIR Ruling is immaterial and irrelevant anddoes not place the government in estoppel in collecting taxes legallydue; (3) in holding that private respondent acted in good faith inapplying BIR Ruling 473-88; and, (4) in failing to consider that theassessment of petitioner is presumed to be regular and the claim fortax refund must be strictly construed against private respondent forbeing in derogation of sovereign authority.Petitioner claims that the main issue before us is whether privaterespondent's reliance on a void BIR ruling conferred upon the latter avested right to apply the same in the computation of its ad valorem taxand claim for tax refund. Sec. 142 (d) of the Tax Code, which providesfor the inclusion of the VAT in the tax base for purposes of computingthe 15% ad valorem tax, is the applicable law in the instant case as itspecifically applies to the manufacturer's wholesale price of cigar andcigarette products and not Sec. 127 (b) of the Tax Code which appliesin general to the wholesale of goods or domestic products. Sec. 142being a specific provision applicable to cigar and cigarettes must

perforce prevail over Sec. 127 (b), a general provision of law insofar asthe imposition of the ad valorem tax on cigar and cigarettes isconcerned. Consequently, the application of Sec. 127 (b) to thewholesale price of cigar and cigarette products for purposes ofcomputing the ad valorem tax is patently erroneous. Accordingly, BIRRuling 473-88 is void ab initio as it contravenes the express provisionsof Sec. 142 (d) of the Tax Code.Petitioner contends that BIR Ruling 473-88 being an erroneousinterpretation of Sec. 142 (b) of the Tax Code does not confer anyvested right to private respondent as to exempt it from the retroactiveapplication of BIR Ruling 017-91. Thus Art. 2254 of the New Civil Codeis explicit that "(n)o vested or acquired right can arise from acts oromissions which are against the law. It is argued that the Court ofAppeals erred in ruling that retroactive application cannot be madesince private respondent acted in good faith. The followingcircumstances would show that private respondents reliance on BIRRuling 473-88 was induced by ill will: first, private respondent despiteknowledge that Sec. 142 of the Tax Code was the specific provisionapplicable still shifted its accounting method pursuant to Sec. 127 (b)of the Tax Code; and, second, the shift in accounting method was madewithout any prior consultation with the BIR.It is further contended by petitioner that claims for tax refund must beconstrued against private respondent. A tax refund being in the natureof a tax exemption is regarded as in derogation of the sovereignauthority and is strictly construed against private respondent as thesame partakes the nature of a tax exemption. Tax exemptions cannotmerely be implied but must be categorically and unmistakablyexpressed.We cannot sustain petitioner. The deficiency tax assessment issued bypetitioner against private respondent is without legal basis because ofthe prohibition against the retroactive application of the revocation ofBIR rulings in the absence of bad faith on the part of privaterespondent.The present dispute arose from the discrepancy in the taxable base onwhich the excise tax is to apply on account of two incongruous BIRRulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excludedthe VAT from the tax base in computing the fifteen percent (15%) excisetax due; and, (2) BIR Ruling 017-91 dated 11 February 1991 whichincluded back the VAT in computing the tax base for purposes of thefifteen percent (15%) ad valorem tax.The question as to the correct computation of the excise tax oncigarettes in the case at bar has been sufficiently addressed by BIRRuling 017-91 dated 11 February 1991 which revoked BIR Ruling 47388 dated 4 October 1988 -

It is to be noted that Section 127 (b) of the Tax Code as amended

applies in general to domestic products and excludes the value-addedtax in the determination of the gross selling price, which is the tax basefor purposes of the imposition of ad valorem tax. On the other hand, thelast paragraph of Section 142 of the same Code which includes thevalue-added tax in the computation of the ad valorem tax, refersspecifically to cigar and cigarettes only. It does not include/apply to anyother articles or goods subject to the ad valorem tax. Accordingly,Section 142 must perforce prevail over Section 127 (b)which is ageneral provision of law insofar as the imposition of the ad valorem taxon cigar and cigarettes is concerned.Moreover, the phrase unless otherwise provided in Section 127 (b)purports of exceptions to the general rule contained therein, such asthat of Section 142, last paragraph thereof which explicitly providesthat in the case of cigarettes, the tax base for purposes of the advalorem tax shall include, among others, the value-added tax.Private respondent did not question the correctness of the above BIRruling. In fact, upon knowledge of the effectivity of BIR Ruling No. 01791, private respondent immediately implemented the method ofcomputation mandated therein by restoring the VAT in computing thetax base for purposes of the 15% ad valorem tax.However, well-entrenched is the rule that rulings and circulars, rulesand regulations promulgated by the Commissioner of Internal Revenuewould have no retroactive application if to so apply them would beprejudicial to the taxpayers.The applicable law is Sec. 246 of the Tax Code, which provides Sec. 246. Non-retroactivity of rulings.- Any revocation, modification, orreversal of any rules and regulations promulgated in accordance withthe preceding section or any of the rulings or circulars promulgated bythe Commissioner of Internal Revenue shall not be given retroactiveapplication if the revocation, modification, or reversal will beprejudicial to the taxpayers except in the following cases: a) where thetaxpayer deliberately misstates or omits material facts from his returnor in any document required of him by the Bureau of Internal Revenue;b) where the facts subsequently gathered by the Bureau of InternalRevenue are materially different from the facts on which the ruling isbased; or c) where the taxpayer acted in bad faith.Without doubt, private respondent would be prejudiced by theretroactive application of the revocation as it would be assesseddeficiency excise tax.What is left to be resolved is petitioners claim that private respondentfalls under the third exception in Sec. 246, i.e., that the taxpayer hasacted in bad faith.

Bad faith imports a dishonest purpose or some moral obliquity and

conscious doing of wrong. It partakes of the nature of fraud; a breachof a known duty through some motive of interest or ill will. We find noconvincing evidence that private respondents implementation of thecomputation mandated by BIR Ruling 473-88 was ill motivated orattended with a dishonest purpose. To the contrary, as a sign of goodfaith, private respondent immediately reverted to the computationmandated by BIR Ruling 017-91 upon knowledge of its issuance on 11February 1991.As regards petitioner's argument that private respondent should havemade consultations with it before private respondent used thecomputation mandated by BIR Ruling 473-88, suffice it to state that theaforesaid BIR Ruling was clear and categorical thus leaving no room forinterpretation. The failure of private respondent to consult petitionerdoes not imply bad faith on the part of the former.Admittedly the government is not estopped from collecting taxes legallydue because of mistakes or errors of its agents. But like otherprinciples of law, this admits of exceptions in the interest of justice andfair play, as where injustice will result to the taxpayer.WHEREFORE, there being no reversible error committed byrespondent Court of Appeals, the petition is DENIED and petitionerCOMMISSIONER OF INTERNAL REVENUE is ordered to refundprivate respondent ALHAMBRA INDUSTRIES, INC., the amount ofP520,835.29 upon finality of this Decision.SO ORDERED.Padilla, (Chairman), Kapunan, and Hermosisima, JJ., concur.Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-66653 June 19, 1986COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.BURROUGHS LIMITED AND THE COURT OF TAX APPEALS,respondents.Sycip, Salazar, Feliciano & Hernandez Law Office for privaterespondent.PARAS, J.:Petition for certiorari to review and set aside the Decision dated June27, 1983 of respondent Court of Tax Appeals in its C.T.A. Case No.3204, entitled "Burroughs Limited vs. Commissioner of InternalRevenue" which ordered petitioner Commissioner of Internal Revenueto grant in favor of private respondent Burroughs Limited, tax credit in

the sum of P172,058.90, representing erroneously overpaid branch

profit remittance tax.Burroughs Limited is a foreign corporation authorized to engage intrade or business in the Philippines through a branch office located atDe la Rosa corner Esteban Streets, Legaspi Village, Makati, MetroManila.Sometime in March 1979, said branch office applied with the CentralBank for authority to remit to its parent company abroad, branch profitamounting to P7,647,058.00. Thus, on March 14, 1979, it paid the 15%branch profit remittance tax, pursuant to Sec. 24 (b) (2) (ii) andremitted to its head office the amount of P6,499,999.30 computed asfollows:Amount applied for remittance................................ P7,647,058.00Deduct: 15% branch profitremittance tax ..............................................1,147,058.70Net amount actually remitted.................................. P6,499,999.30Claiming that the 15% profit remittance tax should have beencomputed on the basis of the amount actually remitted (P6,499,999.30)and not on the amount before profit remittance tax (P7,647,058.00),private respondent filed on December 24, 1980, a written claim for therefund or tax credit of the amount of P172,058.90 representing allegedoverpaid branch profit remittance tax, computed as follows:Profits actually remitted .........................................P6,499,999.30Remittance tax rate .......................................................15%Branch profit remittance taxdue thereon ......................................................P 974,999.89Branch profit remittancetax paid .............................................................Pl,147,058.70Less: Branch profit remittancetax as above computed................................................. 974,999.89Total amount refundable........................................... P172,058.81On February 24, 1981, private respondent filed with respondent court,a petition for review, docketed as C.T.A. Case No. 3204 for the recoveryof the above-mentioned amount of P172,058.81.On June 27, 1983, respondent court rendered its Decision, thedispositive portion of which readsACCORDINGLY, respondent Commission of Internal Revenue is herebyordered to grant a tax credit in favor of petitioner Burroughs Limitedthe amount of P 172,058.90. Without pronouncement as to costs.SO ORDERED.Unable to obtain a reconsideration from the aforesaid decision,petitioner filed the instant petition before this Court with the prayers asherein earlier stated upon the sole issue of whether the tax base uponwhich the 15% branch profit remittance tax shall be imposed under the

provisions of section 24(b) of the Tax Code, as amended, is the amount

applied for remittance on the profit actually remitted after deductingthe 15% profit remittance tax. Stated differently is private respondentBurroughs Limited legally entitled to a refund of the aforementionedamount of P172,058.90.We rule in the affirmative. The pertinent provision of the NationalRevenue Code is Sec. 24 (b) (2) (ii) which states:Sec. 24. Rates of tax on corporations....(b) Tax on foreign corporations. ...(2) (ii) Tax on branch profits remittances. Any profit remitted abroad bya branch to its head office shall be subject to a tax of fifteen per cent(15 %) ...In a Bureau of Internal Revenue ruling dated January 21, 1980 by thenActing Commissioner of Internal Revenue Hon. Efren I. Plana theaforequoted provision had been interpreted to mean that "the tax baseupon which the 15% branch profit remittance tax ... shall be imposed...(is) the profit actually remitted abroad and not on the total branchprofits out of which the remittance is to be made. " The said ruling ishereinbelow quoted as follows:In reply to your letter of November 3, 1978, relative to your query as tothe tax base upon which the 15% branch profits remittance taxprovided for under Section 24 (b) (2) of the 1977 Tax Code shall beimposed, please be advised that the 15% branch profit tax shall beimposed on the branch profits actually remitted abroad and not on thetotal branch profits out of which the remittance is to be made.Please be guided accordingly.Applying, therefore, the aforequoted ruling, the claim of privaterespondent that it made an overpayment in the amount of P172,058.90which is the difference between the remittance tax actually paid ofPl,147,058.70 and the remittance tax that should have been paid ofP974,999,89, computed as followsProfits actually remitted......................................... P6,499,999.30Remittance tax rate.............................................................. 15%Remittance tax due................................................... P974,999.89is well-taken. As correctly held by respondent Court in its assaileddecisionRespondent concedes at least that in his ruling dated January 21, 1980he held that under Section 24 (b) (2) of the Tax Code the 15% branchprofit remittance tax shall be imposed on the profit actually remittedabroad and not on the total branch profit out of which the remittance isto be made. Based on such ruling petitioner should have paid only theamount of P974,999.89 in remittance tax computed by taking the 15%of the profits of P6,499,999.89 in remittance tax actually remitted to itshead office in the United States, instead of Pl,147,058.70, on its net

profits of P7,647,058.00. Undoubtedly, petitioner has overpaid its

branch profit remittance tax in the amount of P172,058.90.Petitioner contends that respondent is no longer entitled to a refundbecause Memorandum Circular No. 8-82 dated March 17, 1982 hadrevoked and/or repealed the BIR ruling of January 21, 1980. The saidmemorandum circular statesConsidering that the 15% branch profit remittance tax is imposed andcollected at source, necessarily the tax base should be the amountactually applied for by the branch with the Central Bank of thePhilippines as profit to be remitted abroad.Petitioner's aforesaid contention is without merit. What is applicable inthe case at bar is still the Revenue Ruling of January 21, 1980 becauseprivate respondent Burroughs Limited paid the branch profitremittance tax in question on March 14, 1979. Memorandum CircularNo. 8-82 dated March 17, 1982 cannot be given retroactive effect in thelight of Section 327 of the National Internal Revenue Code whichprovidesSec. 327. Non-retroactivity of rulings. Any revocation, modification, orreversal of any of the rules and regulations promulgated in accordancewith the preceding section or any of the rulings or circularspromulgated by the Commissioner shag not be given retroactiveapplication if the revocation, modification, or reversal will beprejudicial to the taxpayer except in the following cases (a) where thetaxpayer deliberately misstates or omits material facts from his returnor in any document required of him by the Bureau of Internal Revenue;(b) where the facts subsequently gathered by the Bureau of InternalRevenue are materially different from the facts on which the ruling isbased, or (c) where the taxpayer acted in bad faith. (ABS-CBNBroadcasting Corp. v. CTA, 108 SCRA 151-152)The prejudice that would result to private respondent BurroughsLimited by a retroactive application of Memorandum Circular No. 8-82is beyond question for it would be deprived of the substantial amount ofP172,058.90. And, insofar as the enumerated exceptions areconcerned, admittedly, Burroughs Limited does not fall under any ofthem.WHEREFORE, the assailed decision of respondent Court of Tax Appealsis hereby AFFIRMED. No pronouncement as to costs.SO ORDERED.Feria, Fernan, Alampay and Gutierrez, Jr., JJ., concur.Republic of the PhilippinesSUPREME COURTManila

EN BANCG.R. No. L-12182March 27, 1918VIUDA E HIJOS DE PEDRO P. ROXAS, plaintiffs-appellees,vs.JAMES J. RAFFERTY, Collector of Internal Revenue, ex officiocity assessor and collector of Manila, defendant-appellant.City Fiscal Paredes for appellant.Gilbert, Cohn and Fisher forappellees.MALCOLM, J.:This appeal presents the question of whether or not taxes can becollected on the Roxas Building in the city of Manila for the year 1915.FACTS.Plaintiffs own a parcel of land located on the Escolta in the city ofManila. In the latter part of 1913, the improvements of this land weredemolished, and the construction of a reinforced concrete building wasbegun. No taxes on the improvements were levied or paid for the year1914. Accepting the findings of fact by the trial court, the Roxasbuilding in December, 1914, when the city assessor and collectorattempted to assess it for taxation, still lacked the pavement of theentrances, the floors of some of the stores the dividing partitionsbetween the stores, the dividing partitions between the greater part ofthe rooms in the upper stories, sanitary installation, the elevators,electrical installation, the roof of the building, the concrete coveringand towers of the elevator shaft, and the doors and windows of manyrooms. It was finished in all respects on February 15, 1915.The city assessor and collector of Manila, under the date of December1, 1914, sent plaintiffs notice, received by them on December 25, 1914,requiring them to declare the new improvements for assessments forthe year 1915. Prior to this, in November, the city assessor andcollector had the building inspected and had assessed the newimprovements for taxation for 1915 at P300,000. On January 15, 1915,plaintiffs were notified of this assessment. Plaintiffs paid the amount ofthe taxes, which amounted to P3,000, under protest on June 30, 1915.Suit was begun in the Court of First Instance of Manila to recover thissum with interest at the legal rate from the date of payment. The court,the Honorable Simplicio del Rosario, found with plaintiffs withoutexpress finding as to costs. Defendant, by the city attorney of Manila,appealed, making five assignments of error which we combine forpurposes of convenience into three issues.LEGAL ISSUES.1. Jurisdiction. The first assignment of error, concerning thejurisdiction of the lower court, presents a question of primaryimportance for obviously if the lower court had no right to takecognizance of this case, we should not burden ourselves with the

consideration of its merits. This question appellee emphasizes, is

argued for the first time on appeal. In the trial court, defendantappeared, demurred, and answered without assailing jurisdiction.However, as jurisdiction is the power of a court to act at all, we shouldeven now resolve the question. Objection for want of jurisdiction maybe raised for the first time on appeal.The local law, as elsewhere, provides an administrative procedure forthe assessment of realty. An assessor to fix the value of the property inthe first instance, and a board of tax appeals to review the action of theassessor in the second instance are constituted. Proceedings beforethis board are quasi-judicial in nature. To it the citizen must apply forrelief against excessive and irregular taxation. Here must be aggrievedparty go for the correction of errors in assessments. Administrativeremedies must be exhausted before resort can be had to the courts. Itis a condition precedent to the exercise of the taxpayer's right of actionin a court of justice that previous and timely effort shall have beenmade on his part to have the board of tax appeals correct an allegederror while the matter was yet in their hands and under their control.Even when the courts assume jurisdiction, they will not presume tointerfere with the intelligent exercise of the judgment of men speciallytrained in appraising property. (See Stanley vs. Supervisors of Albany[1887], 121 U. S., 535)This is hardly our case. We do not have before us merely a dispute as toan excessive or unequal assessment. The assessment is claimed to bewholly void. The contention is that the assessor has attempted to levy atax upon property, which is by law exempt, and that in this attempt theassessor has violated the provisions of law, which exist for theprotection of the taxpayer. Not the correctness of the assessment, butthe legality of the assessment is involved. The rule of taxation is thatwhere there tax is illegal, the taxpayer may bring an action directly inthe courts to recover back the tax. (Roman Catholic Church vs. Cooleyon Taxation, 3rd ed., p. 1382, and Stanley vs. Supervisors of Albany,supra.) This court has taken cognizance of questions concerningassessments of and improvements on reality in a number of cases. (SeeFernandez vs. Shearer [1911], 19 Phil., 75; Ayala de Roxas vs. City ofManila [1914], 27 Phil., 336; Young Men's Christians Association ofManila vs. Collector of Internal Revenue [1916], 33 Phil. Rep., 217.)The distinction is between a void and an erroneous tax. The firstidentifies the existing situation and gives jurisdiction to the courts.The situation in its simplest terms may be described as follows: Thecitizens is forced to pay the alleged tax. As will hereafter appear, hehad no appropriate opportunity to present his grievance to the board oftax appeals. He did all that was required by protesting at the time ofpaying the tax. The citizen can therefore in turn bee permitted to bring

suit to recover the amount which he claims was unlawfully collected.

Appeal to the board of tax appeals is not a necessary prerequisite. Noris the decision of the assessor as to the right to tax property of such ajudicial or discretionary character as to be free from collateral attack.When the state (here the city of Manila) makes the assessment, andwhen the citizen stands on reasonably equal terms. The power of thestate and the remedy of the citizen are and should be reciprocal. It isfor the courts to arbitrate the controversy between the state and thecitizen.The Court of First Instance of the city of Manila had jurisdiction overthis suit and the Supreme Court of the Philippine Islands now possessessimilar appellate jurisdiction.2. Legality of assessment. The second, third, and fourth assignmentof error concern the point of when an improvement can be said to becompleted within the meaning of the Manila Charter. We feel itunnecessary to decide this question for even more basic in aspect is thepoint raised by the fifth assignment of error concerning the legality ofthe assessment, particularly as relating to notification. The exactsituation can be more vividly pictured by quoting the provisions of thelaw and then applying these provisions to the facts.The Manila Charter provides: "It shall be the duty of each person whoat any time acquires real estate in the city,, and of any person whoconstructs or adds to any improvement on real estate owned by himwithin the city, to prepare and present to the city assessor andcollector, within a period of sixty days next succeeding the completionof such acquisition, construction or addition, a sworn declarationsetting forth the value of the real estate acquired or the improvementconstructed or addition made by him and containing a description ofsuch property sufficient to enable the city assessor and collector readilyto identify the same. . . ." (Section 2484, Administrative Code of 1917.)Plaintiffs were under obligation too present a declaration of theirimprovements within sixty days succeeding completion, i. e. on orbefore April 15, 1915. Under an attempted assessment in Novemberand December, 1914, the plaintiffs had and could have had noopportunity to comply with the law.The Charter continues: "The city assessor and collector shall, duringthe first fifteen days of December of each year, add to his list of taxablereal estate in the city the value of the improvements placed upon suchproperty during the preceding year, and any property which is taxableand which has therefore escaped taxation. . . ." (Sec. 2487,Administrative Code of 1917.) Between December 1 and December 15,1915, the city assessor and collector was under the obligation andadding the improvements on the Roxas property to the assessment list.Between December 1 and December 15, 1914, the city assessor and

collector could not prematurely and by anticipation perform this duty

on improvements not yet completed. There may be doubt as to theexact meaning, which should be given to the words "during thepreceding year." The common sense construction would be that thephrase includes December of the previous year and the current year toDecember. The city assessor and collector perforce could not in 1914levy a tax on incomplete improvements made during the current year,when the statute only authorized him to make such levy uponcompleted improvements made during the year.The Charter continues: "He (the city assessor and collector) shall givenotice by publication for ten days prior to December first in twonewspapers of general circulation published in the city, one printed inEnglish and one in Spanish, that he will be present in his office for thatpurpose on said days, and he shall further notify in writing each personthe amount of whose tax will be changed by such action or suchproposed change, by delivering or mailing such notification to suchperson or his authorized agent at the last known address of such owneror agent in the Philippine Islands some time in the month ofNovember." (Sec. 2487, Administrative Code of 1917.) And finally theCharter provides that, "No court shall entertain any suit assailing thevalidity of a tax assessed under this article until the taxpayer shall havepaid, under protest, the taxes assessed against him, nor shall any courtdeclare any tax invalid by reason of irregularities or informalities in theproceedings of the officer in charged with the assessment or collectionof taxes, or of failure to perform their duties within the times hereinspecified for their performance, unless such irregularities,informalities, or failures shall have impaired the substantial rights ofthe taxpayer; nor shall any court declare any tax assessed under theprovisions of article invalid except upon condition that the taxpayershall pay the just amount of his tax as determined by the court in thepending proceeding." (Sec. 2504, Administrative Code of 1917.) It is ageneral rule that those provisions of a statute relating to theassessment of taxes, which are intended for the security of the citizen,or to insure the equality of taxation, or certainty as to the nature andamount of each person's tax, are mandatory; but those designed merelyfor the information or direction of officers or to secure methodical andsystematic modes of proceedings are merely directory. In the languageof the United States Supreme Court, "When the regulations prescribedare intended for the protection of the citizen and to prevent a sacrificeof his property, and by a disregard of which his right might be, andgenerally would be, injuriously affected, they are not directory butmandatory." (French vs. Edwards [1871], 13 Wall., 506.) Sometimesstatutes requiring the assessor to notify the taxpayer have been heldmerely directory. But in the majority of jurisdictions this requirement is

held to be mandatory, so that the assessor cannot make a valid

assessment unless he has given proper notice. (37 Cyc., pp. 988, 991,citing cases.) Applied to our facts, the assessor should have notified theplaintiffs during November, 1915. His attempted notification onDecember 25, 1914, was not given during the time fixed by statute andwas no more than a reminder to plaintiffs to present a sworndeclaration of the value of the new improvements on their property. Inthis instance there was no such substantial compliance with the law asamounts to due process of law.There was no legal assessment of the Roxas Building for the year 1915.3. Interest. To narrow our discussion and to avoid misunderstanding,let us set down a few principles, which every one knows. The UnitedStates of America, a State of the Islands cannot be sued without theirconsent. Whether interest could bee adjudged to a taxpayer against anyof these entities, is beside the our question. But what is of moment isthat the city of Manila is not sovereign but is a public corporation withcertain delegated powers, including that of suing and being sued.Turning to the American authorities, which are controlling, we find thefollowing: The basic case is Erskine vs. Van Arsdale ([1872], 15 Wall.,68-75). Suit as brought against a collecting officer to recover backcertain taxes claimed to be exempt under a Federal statute. Interestwas added to the judgment for the plaintiff. The United States SupremeCourt, through the Chief Justice, said that "Where an illegal tax hasbeen collected, the citizen who has paid it, and has been obliged tobring suit against the collector, is, we think, entitled too interest in theevent of recovery, from time of the illegal exaction." This case shouldnot be confused with others which hold that the United States cannotbe subjected to the payment of interest unless there be an authorizedengagement to pay it, or a statute permitting its recovery. (Angarica vs.Bayard [1888] 127 U. S., 251; United States vs. State of North Carolina[1890], 136 U. S., 211; National Home for Disabled Volunteer Soldiersvs. Parrish [1912], 229 U. S., 494.) The distinction appears to bebetween suits to recover moneys illegally exacted as taxes and paidunder protest, brought against collectors, although the judgment is notto be paid by the collector but directly from the Treasury, and suitsagainst the United States. A late decision of the United States SupremeCourt (National Home for Disabled Volunteer Soldiers vs. Parrish,supra), which reviews the previous cases, held that the National Homefor Disabled Volunteer Soldiers was not exempt from the payment ofinterest on a judgment for the recovery of taxes. The court said that theexemption in favor of the United States "has never as yet been appliedto subordinate governmental agencies."Some States hold that a municipal corporation is not liable for interestunless so required by special contract or by statute. In other States,

however, it is held that notwithstanding a municipal corporation has

delegated to it certain powers of government, it is to be regarded as aprivate person with respect to its contracts, which are to be consideredin the manner and with a like effect as those of natural persons. (See 15R. C. L., 18.) Even where the stricter rule is observed, as Illinois, it isnevertheless settled that a municipal corporation which wrongfullyexacts money and holds the same without just claim or right is liablefor the interest thereon. (City of Chicago vs. N. W. Mutual Ins. Co.[1905], 218 Ill., 40. See also In re O'Berry [1904], 179 N. Y., 285.)Laches on the part of the plaintiff would, of course, defeat the right torecover interest. (Redfield vs. Ystefera Iron Co. [1884], 110 U. S., 174.)The city of Manila, a public corporation, even in the absence of statute,is liable to pay interest at the legal rate, from the date of exaction, inthe amount of taxes illegally collected.CONCLUSION.In conclusion, as an authority which is on all fours with the prominentissues before us, we invite attention to the decision of a United StatesCircuit Court, in Powder River Cattle Co. vs. Board of Commissioners ofCuster County ([1891], 45 Fed., 232). The Revised Statutes of Montanaprovided that the assessor shall demand of each taxpayer in the districta list of his personal property and on his refusing to give it, theassessor shall list his property on information and belief. The assessorlisted the property of the defendant without demanding a list from thetaxpayer. The court held that the taxpayer may recover the illegal taxespaid under compulsion and is not required to apply to the board ofequalization for an abatement. The court, finally adjudged legal intereston the sum illegally exacted from the date collection was made.We think the court below took the correct view of the case, and, whileresolving the appeal on somewhat different grounds, believe that thejudgment should stand. Accordingly, the judgment is affirmed, withoutspecial finding as to costs. So ordered.Arellano, C.J., Torres, Carson, Araullo, Street and Avancea, JJ., concur.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-2678December 29, 1949ANTONIO C. ARAGON, petitioner-appellant,vs.MARCOS JORGE, Provincial Treasurer of Zambales, respondentappellee.Antonio C. Aragon in his own behalf.Office of the Solicitor General FelixBautista Angelo and Solicitor Francisco Carreon for appellee.

OZAETA, J.:This is an appeal from a judgment of the Court of First Instance ofZambales denying appellant's petition for mandamus to compel therespondent provincial treasurer to issue final bills of sale coveringnumerous parcels of land situated in the municipalities of Santa Cruzand Candelaria, Zambales, which the petitioner alleged to havepurchased at auction sales made by the respective municipal treasurersof said municipalities for tax delinquencies and which had not beenredeemed by the owners within one year.The provincial treasurer, supported by an opinion of the provincialfiscal, held the sales void for irregularities and refused to issue the finalbills of sale, but in his answer he alleged that he had offered to refundthe purchase price but that the petitioner thru his counsel refused toaccept it.The trial court sustained the opinion of the fiscal and the provincialtreasurer.The real properties located in the municipality of Santa Cruz wereadvertised for sale "at public auction to be held at the main entrance ofthe municipal building of said municipality from March 24, 1947, at 10a.m. until all sold, to satisfy all taxes and penalties due thereon and thecost of the sale, pursuant to the provisions of section 35 ofCommonwealth Act No. 470, subject to the conditions provided insection 36 of said Act." The sale did not take place on the date abovefixed but on May 12, 13, 14, and 15, 1947, without a new advertisementand without a new notice to the owners concerned. On the dates lastmentioned 253 parcels with an aggregate assessed value of P67, 150were sold for only P1,471.The real properties located in the municipality of Candelaria wereoriginally advertised for sale "at public auction to be held at the mainentrance of the municipal building of said municipality from May 5,1947, at 10 A. M. until sold, to satisfy all taxes and penalties duethereon and the cost of sale, pursuant to the provisions of section 35 ofCommonwealth Act No. 470, subject to the conditions provided insection 36 of said Act." Likewise the sale did not take place on the dateabove fixed but on June 12, 1947, without a new advertisement andwithout a new notice to the owners concerned. On said date 71 lotswith an aggregate assessed value of P32,250 were sold for onlyP820.19.It was not the petitioner who bid at both auction sales but one PedroPorras; and it was not the latter who paid the purchase price but PublicDefender Moises Ma. Buhain, who caused the official receipts to beissued in the name of the herein petitioner Antonio c. Aragon. Thelatter is a Manila resident who had no house and no interest any kind inZambales. Public defender Buhain was the one who appeared in the

trial court as counsel and attorney-in-fact of the petitioner. The trial

court intimated that the petitioner was a dummy of the public defender,who as a public official was prohibited by section 579 of the revisedAdministrative Code "from purchasing, directly or indirectly, from theGovernment, any property sold by the Government for the nonpaymentof any public tax. Any such purchase by a public official or employeeshall be void."While there is ground for suspension that said provision of the revisedAdministrative Code may have been violated, in the absence ofcategorical finding by the trial court on that point we must decide thiscase on the alleged nullity of sale for lack of notice. Notice of such saleto the delinquent taxpayers and landowners in particular and to thepublic in general is an essential and indispensable requirement of thelaw, the non-fulfilment of which vitiates and nullifies the sale. (Section35, Commonwealth Act No. 470, known as the Assessment Law;Cabrera vs. Provincial Treasurer of Tayabas, 42 O. G. 1492.) 1The sale should have been made on a fixed date as originallyadvertised, or if that was not practicable and if it was desired topostpone the sale indefinitely "to give a chance to the taxpayers to paytheir delinquent taxes," as was done in this case, new notices to thetaxpayers and to the public should have been made.The sales in question being void for lack of due notice, the respondentprovincial treasurer cannot be compelled to issue the final bills of saledemanded by the petitioner.The judgment is affirmed, with costs against the appellants.Moran, C.J., Paras, Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyesand Torres, JJ., concur.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-41631 December 17, 1976HON. RAMON D. BAGATSING, as Mayor of the City of Manila;ROMAN G. GARGANTIEL, as Secretary to the Mayor; THEMARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OFMANILA, petitioners,vs.HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge ofthe Court of First Instance of Manila, Branch XXX and theFEDERATION OF MANILA MARKET VENDORS, INC., respondents.Santiago F. Alidio and Restituto R. Villanueva for petitioners.Antonio H. Abad, Jr. for private respondent.Federico A. Blay for petitioner for intervention.

MARTIN, J.:The chief question to be decided in this case is what law shall governthe publication of a tax ordinance enacted by the Municipal Board ofManila, the Revised City Charter (R.A. 409, as amended), whichrequires publication of the ordinance before its enactment and after itsapproval, or the Local Tax Code (P.D. No. 231), which only demandspublication after approval.On June 12, 1974, the Municipal Board of Manila enacted OrdinanceNo. 7522, "AN ORDINANCE REGULATING THE OPERATION OFPUBLIC MARKETS AND PRESCRIBING FEES FOR THE RENTALS OFSTALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOFAND FOR OTHER PURPOSES." The petitioner City Mayor, Ramon D.Bagatsing, approved the ordinance on June 15, 1974.On February 17, 1975, respondent Federation of Manila MarketVendors, Inc. commenced Civil Case 96787 before the Court of FirstInstance of Manila presided over by respondent Judge, seeking thedeclaration of nullity of Ordinance No. 7522 for the reason that (a) thepublication requirement under the Revised Charter of the City ofManila has not been complied with; (b) the Market Committee was notgiven any participation in the enactment of the ordinance, asenvisioned by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft andCorrupt Practices Act has been violated; and (d) the ordinance wouldviolate Presidential Decree No. 7 of September 30, 1972 prescribingthe collection of fees and charges on livestock and animal products.Resolving the accompanying prayer for the issuance of a writ ofpreliminary injunction, respondent Judge issued an order on March 11,1975, denying the plea for failure of the respondent Federation ofManila Market Vendors, Inc. to exhaust the administrative remediesoutlined in the Local Tax Code.After due hearing on the merits, respondent Judge rendered itsdecision on August 29, 1975, declaring the nullity of Ordinance No.7522 of the City of Manila on the primary ground of non-compliancewith the requirement of publication under the Revised City Charter.Respondent Judge ruled:There is, therefore, no question that the ordinance in question was notpublished at all in two daily newspapers of general circulation in theCity of Manila before its enactment. Neither was it published in thesame manner after approval, although it was posted in the legislativehall and in all city public markets and city public libraries. There beingno compliance with the mandatory requirement of publication beforeand after approval, the ordinance in question is invalid and, therefore,null and void.Petitioners moved for reconsideration of the adverse decision, stressingthat (a) only a post-publication is required by the Local Tax Code; and

(b) private respondent failed to exhaust all administrative remedies

before instituting an action in court.On September 26, 1975, respondent Judge denied the motion.Forthwith, petitioners brought the matter to Us through the presentpetition for review on certiorari.We find the petition impressed with merits.1. The nexus of the present controversy is the apparent conflictbetween the Revised Charter of the City of Manila and the Local TaxCode on the manner of publishing a tax ordinance enacted by theMunicipal Board of Manila. For, while Section 17 of the Revised Charterprovides:Each proposed ordinance shall be published in two daily newspapers ofgeneral circulation in the city, and shall not be discussed or enacted bythe Board until after the third day following such publication. * * * Eachapproved ordinance * * * shall be published in two daily newspapers ofgeneral circulation in the city, within ten days after its approval; andshall take effect and be in force on and after the twentieth dayfollowing its publication, if no date is fixed in the ordinance.Section 43 of the Local Tax Code directs:Within ten days after their approval, certified true copies of allprovincial, city, municipal and barrio ordinances levying or imposingtaxes, fees or other charges shall be published for three consecutivedays in a newspaper or publication widely circulated within thejurisdiction of the local government, or posted in the local legislativehall or premises and in two other conspicuous places within theterritorial jurisdiction of the local government. In either case, copies ofall provincial, city, municipal and barrio ordinances shall be furnishedthe treasurers of the respective component and mother units of a localgovernment for dissemination.In other words, while the Revised Charter of the City of Manila requirespublication before the enactment of the ordinance and after theapproval thereof in two daily newspapers of general circulation in thecity, the Local Tax Code only prescribes for publication after theapproval of "ordinances levying or imposing taxes, fees or othercharges" either in a newspaper or publication widely circulated withinthe jurisdiction of the local government or by posting the ordinance inthe local legislative hall or premises and in two other conspicuousplaces within the territorial jurisdiction of the local government.Petitioners' compliance with the Local Tax Code rather than with theRevised Charter of the City spawned this litigation.There is no question that the Revised Charter of the City of Manila is aspecial act since it relates only to the City of Manila, whereas the LocalTax Code is a general law because it applies universally to all localgovernments. Blackstone defines general law as a universal rule

affecting the entire community and special law as one relating to

particular persons or things of a class. 1 And the rule commonly said isthat a prior special law is not ordinarily repealed by a subsequentgeneral law. The fact that one is special and the other general creates apresumption that the special is to be considered as remaining anexception of the general, one as a general law of the land, the other asthe law of a particular case. 2 However, the rule readily yields to asituation where the special statute refers to a subject in general, whichthe general statute treats in particular. The exactly is the circumstanceobtaining in the case at bar. Section 17 of the Revised Charter of theCity of Manila speaks of "ordinance" in general, i.e., irrespective of thenature and scope thereof, whereas, Section 43 of the Local Tax Coderelates to "ordinances levying or imposing taxes, fees or other charges"in particular. In regard, therefore, to ordinances in general, the RevisedCharter of the City of Manila is doubtless dominant, but, that dominantforce loses its continuity when it approaches the realm of "ordinanceslevying or imposing taxes, fees or other charges" in particular. There,the Local Tax Code controls. Here, as always, a general provision mustgive way to a particular provision. 3 Special provision governs. 4 This isespecially true where the law containing the particular provision wasenacted later than the one containing the general provision. The CityCharter of Manila was promulgated on June 18, 1949 as against theLocal Tax Code which was decreed on June 1, 1973. The law-makingpower cannot be said to have intended the establishment of conflictingand hostile systems upon the same subject, or to leave in forceprovisions of a prior law by which the new will of the legislating powermay be thwarted and overthrown. Such a result would renderlegislation a useless and Idle ceremony, and subject the law to thereproach of uncertainty and unintelligibility. 5The case of City of Manila v. Teotico 6 is opposite. In that case, Teoticosued the City of Manila for damages arising from the injuries hesuffered when he fell inside an uncovered and unlighted catchbasin ormanhole on P. Burgos Avenue. The City of Manila denied liability on thebasis of the City Charter (R.A. 409) exempting the City of Manila fromany liability for damages or injury to persons or property arising fromthe failure of the city officers to enforce the provisions of the charter orany other law or ordinance, or from negligence of the City Mayor,Municipal Board, or other officers while enforcing or attempting toenforce the provisions of the charter or of any other law or ordinance.Upon the other hand, Article 2189 of the Civil Code makes cities liablefor damages for the death of, or injury suffered by any persons byreason of the defective condition of roads, streets, bridges, publicbuildings, and other public works under their control or supervision. Onreview, the Court held the Civil Code controlling. It is true that, insofar

as its territorial application is concerned, the Revised City Charter is a

special law and the subject matter of the two laws, the Revised CityCharter establishes a general rule of liability arising from negligence ingeneral, regardless of the object thereof, whereas the Civil Codeconstitutes a particular prescription for liability due to defective streetsin particular. In the same manner, the Revised Charter of the Cityprescribes a rule for the publication of "ordinance" in general, whilethe Local Tax Code establishes a rule for the publication of "ordinancelevying or imposing taxes fees or other charges in particular.In fact, there is no rule which prohibits the repeal even by implicationof a special or specific act by a general or broad one. 7 A charterprovision may be impliedly modified or superseded by a later statute,and where a statute is controlling, it must be read into the charternotwithstanding any particular charter provision. 8 A subsequentgeneral law similarly applicable to all cities prevails over anyconflicting charter provision, for the reason that a charter must not beinconsistent with the general laws and public policy of the state. 9 Achartered city is not an independent sovereignty. The state remainssupreme in all matters not purely local. Otherwise stated, a chartermust yield to the constitution and general laws of the state, it is to haveread into it that general law which governs the municipal corporationand which the corporation cannot set aside but to which it must yield.When a city adopts a charter, it in effect adopts as part of its chartergeneral law of such character. 102. The principle of exhaustion of administrative remedies is stronglyasserted by petitioners as having been violated by private respondentin bringing a direct suit in court. This is because Section 47 of theLocal Tax Code provides that any question or issue raised against thelegality of any tax ordinance, or portion thereof, shall be referred foropinion to the city fiscal in the case of tax ordinance of a city. Theopinion of the city fiscal is appealable to the Secretary of Justice, whosedecision shall be final and executory unless contested before acompetent court within thirty (30) days. But, the petition below plainlyshows that the controversy between the parties is deeply rooted in apure question of law: whether it is the Revised Charter of the City ofManila or the Local Tax Code that should govern the publication of thetax ordinance. In other words, the dispute is sharply focused on theapplicability of the Revised City Charter or the Local Tax Code on thepoint at issue, and not on the legality of the imposition of the tax.Exhaustion of administrative remedies before resort to judicial bodies isnot an absolute rule. It admits of exceptions. Where the questionlitigated upon is purely a legal one, the rule does not apply. 11 Theprinciple may also be disregarded when it does not provide a plain,

speedy and adequate remedy. It may and should be relaxed when itsapplication may cause great and irreparable damage. 123. It is maintained by private respondent that the subject ordinance isnot a "tax ordinance," because the imposition of rentals, permit fees,tolls and other fees is not strictly a taxing power but a revenue-raisingfunction, so that the procedure for publication under the Local TaxCode finds no application. The pretense bears its own marks of fallacy.Precisely, the raising of revenues is the principal object of taxation.Under Section 5, Article XI of the New Constitution, "Each localgovernment unit shall have the power to create its own sources ofrevenue and to levy taxes, subject to such provisions as may beprovided by law." 13 And one of those sources of revenue is what theLocal Tax Code points to in particular: "Local governments may collectfees or rentals for the occupancy or use of public markets and premises* * *." 14 They can provide for and regulate market stands, stalls andprivileges, and, also, the sale, lease or occupancy thereof. They canlicense, or permit the use of, lease, sell or otherwise dispose of stands,stalls or marketing privileges. 15It is a feeble attempt to argue that the ordinance violates PresidentialDecree No. 7, dated September 30, 1972, insofar as it affects livestockand animal products, because the said decree prescribes the collectionof other fees and charges thereon "with the exception of ante-mortemand post-mortem inspection fees, as well as the delivery, stockyard andslaughter fees as may be authorized by the Secretary of Agricultureand Natural Resources." 16 Clearly, even the exception clause of thedecree itself permits the collection of the proper fees for livestock. Andthe Local Tax Code (P.D. 231, July 1, 1973) authorizes in its Section 31:"Local governments may collect fees for the slaughter of animals andthe use of corrals * * * "4. The non-participation of the Market Committee in the enactment ofOrdinance No. 7522 supposedly in accordance with Republic Act No.6039, an amendment to the City Charter of Manila, providing that "themarket committee shall formulate, recommend and adopt, subject tothe ratification of the municipal board, and approval of the mayor,policies and rules or regulation repealing or maneding existingprovisions of the market code" does not infect the ordinance with anygerm of invalidity. 17 The function of the committee is purelyrecommendatoryastheunderscoredphrasesuggests,itsrecommendation is without binding effect on the Municipal Board andthe City Mayor. Its prior acquiescence of an intended or proposed cityordinance is not a condition sine qua non before the Municipal Boardcould enact such ordinance. The native power of the Municipal Boardto legislate remains undisturbed even in the slightest degree. It canmove in its own initiative and the Market Committee cannot demur. At

most, the Market Committee may serve as a legislative aide of the

Municipal Board in the enactment of city ordinances affecting the citymarkets or, in plain words, in the gathering of the necessary data,studies and the collection of consensus for the proposal of ordinancesregarding city markets. Much less could it be said that Republic Act6039 intended to delegate to the Market Committee the adoption ofregulatory measures for the operation and administration of the citymarkets. Potestas delegata non delegare potest.5. Private respondent bewails that the market stall fees imposed in thedisputed ordinance are diverted to the exclusive private use of theAsiatic Integrated Corporation since the collection of said fees hadbeen let by the City of Manila to the said corporation in a "Managementand Operating Contract." The assumption is of course saddled onerroneous premise. The fees collected do not go direct to the privatecoffers of the corporation. Ordinance No. 7522 was not made for thecorporation but for the purpose of raising revenues for the city. That isthe object it serves. The entrusting of the collection of the fees does notdestroy the public purpose of the ordinance. So long as the purpose ispublic, it does not matter whether the agency through which the moneyis dispensed is public or private. The right to tax depends upon the

ultimate use, purpose and object for which the fund is raised. It is notdependent on the nature or character of the person or corporationwhose intermediate agency is to be used in applying it. The people maybe taxed for a public purpose, although it be under the direction of anindividual or private corporation. 18Nor can the ordinance be stricken down as violative of Section 3(e) ofthe Anti-Graft and Corrupt Practices Act because the increased rates ofmarket stall fees as levied by the ordinance will necessarily inure to theunwarranted benefit and advantage of the corporation. 19 We areconcerned only with the issue whether the ordinance in question isintra vires. Once determined in the affirmative, the measure may not beinvalidated because of consequences that may arise from itsenforcement. 20ACCORDINGLY, the decision of the court below is hereby reversed andset aside. Ordinance No. 7522 of the City of Manila, dated June 15,1975, is hereby held to have been validly enacted. No. costs.SO ORDERED.Castro, C.J., Barredo, Makasiar, Antonio, Muoz Palma, Aquino andConcepcion, Jr., JJ., concur.Teehankee, J., reserves his vote.